Nasdaq Futures Surge Amid Bullish Chip Forecast as Microsoft Falters

Nasdaq futures rose over 1% following Advanced Micro Devices' optimistic forecast on AI-chip sales, boosting many chip stocks. Despite this, Microsoft saw a downturn ahead of a crucial U.S. interest-rate decision. The tech-heavy Nasdaq and S&P 500 are facing a tough month, while the Dow shows resilience.

Nasdaq futures saw a notable increase of over 1% on Wednesday, driven by a bullish forecast from Advanced Micro Devices (AMD) that uplifted underperforming chip stocks. However, Microsoft diverged from the upward trend in tech with a significant drop ahead of a critical U.S. interest-rate decision.

AMD's impressive 9.2% surge in premarket trading came on the back of a raised 2024 forecast for AI-chip sales. This optimistic outlook sparked jumps between 2% and 5.2% in other chip stocks including Nvidia, Intel, Marvell Technology, Qualcomm, Broadcom, and Arm Holdings.

At 5:39 a.m. ET, various e-mini indexes reflected the market's positive sentiment, with Dow futures up 171 points (0.42%), S&P 500 futures up 53.25 points (0.97%), and Nasdaq 100 futures up 287.5 points (1.52%). While tech and chip stocks hit records earlier this year, they have recently faced declines as investors shift focus to undervalued sectors.

The Philadelphia SE Semiconductor index is poised for its first monthly decline in three months and its worst performance since September 2022. Similar downward trends are noted in the Nasdaq and S&P 500, in contrast to the Dow's best monthly showing since last December. Microsoft slid by 2.6%, driven by increased spending on AI infrastructure despite a slowdown in its cloud business growth.

Other tech giants, such as Alphabet, Apple, Amazon, Meta Platforms, and Tesla showed modest gains between 0.2% to 1.3%. Meta is set to report earnings post-market close, with Apple and Amazon following on Thursday.

Quarterly earnings from Tesla, Microsoft, and Alphabet fell short of Wall Street's expectations, raising doubts about whether the AI-led equity run has further potential. Investors eagerly await a key monetary policy announcement from the Federal Reserve, anticipated to maintain current rates while hinting at a possible rate cut in September.

Traders, already banking on a rate cut by September as per CME's FedWatch, worry that any deviation could exacerbate the recent equity downturn. The S&P 500 and Nasdaq saw declines on Tuesday, primarily due to weakened tech and chip shares, while the Dow benefited from a rotation into fading sectors.

Additionally, July's ADP National Employment figures, expected at 8:15 a.m. ET, are under watch following strong U.S. job data, suggesting labor market resilience. In earnings news, Starbucks rose by 2.3% thanks to improved store operations that met profit targets, while Pinterest dropped 12.5% due to a downbeat revenue forecast. Match Group, however, jumped 10% following a revenue beat and staff reduction plans.

(With inputs from agencies.)