Microsoft, Meta drag tech stocks lower on concerns over AI spending

• Stocks tumbled sharply on Thursday, dragged down by tech.

• Microsoft and Meta stock dropped on renewed concerns over AI spending.

• Jobless claims fell more than expected while the Fed’s preferred inflation gauge edged closer to 2%.

US stocks fell sharply on Thursday, with the tech-heavy Nasdaq sliding almost 3% as Meta and Microsoft faced steep losses.

The tech sell-off was sparked by the latest earnings from mega-cap firms that mostly exceeded estimates but disappointed investors in other areas and exacerbated concerns about heavy investment in artificial intelligence.

The S&P 500 dropped almost 2% while the Dow Jones Industrial Average lost more than 370 points.

Here’s where US indexes stood at the 4:00 p.m. closing bell on Thursday:

Much of the disappointment came down to the tech giants’ guidance.

Microsoft said it expects the current quarter’s revenue to come in between $68.1 billion and $69.1 billion, while analysts polled by FactSet had expected $69.89 billion. The company attributed the slowdown partially to its investment in cloud computing capacity for AI demand.

Microsoft’s stock fell 6% to close at $406.35.

Meta, meanwhile, said it expects a ramp up in capital expenditures in the next year as it continues to spend on AI, and raised its capex forecast for this year to a range of $38 billion to $40 billion, from $37 billion to $40 billion.

Analysts from UBS, though, remain positive that the increased spend will deliver.

“While Meta continues to signal a significant increase in CapEx for 2025, the results also highlighted multiple offsets to illustrate what the investments will start to bring – as we have been calling out previously, the easiest item to observe is the absolute step up in revenue dollar growth in 2024 which stands at ~$28B currently and nearly matching the Pandemic-driven acceleration from 2021 of ~$29B,” the analysts wrote in a Thursday note.

Meta’s shares lost 4% to close at %567.68.

Also on Thursday, investors digested the Federal Reserve’s preferred inflation gauge. The personal consumption expenditures index cooled to 2.1% year over year in September from 2.2% in August, but the core index—which excludes volatile food and energy prices—came in higher than forecasts at 2.7%.

Jobless claims, meanwhile, fell by more than expected to 216,000 last week, a fall of 12,000 from the week prior. Economists had expected 230,000 claims.

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