Wall Street's AI Woes: Meta and Microsoft Shake Investor Confidence

Wall Street futures have fallen amid warnings from Meta and Microsoft about rising AI costs. Despite strong earnings, concerns over AI investments are affecting megacap stocks like Facebook-owner Meta, Microsoft, Nvidia, and Alphabet. The market's reaction reflects challenges faced by companies in meeting investor expectations.

Wall Street experienced a sharp decline on Thursday following warnings from Meta Platforms and Microsoft regarding increased artificial intelligence-related expenses. This dampened the growth outlook for megacap stocks, which have been leading market gains this year.

Meta's shares dropped 4%, while Microsoft fell 3.7% in premarket trading, despite both companies surpassing earnings forecasts. Investors are also anticipating the upcoming release of the Personal Consumption Expenditures index and nonfarm payrolls data for further insights into potential Federal Reserve policy changes.

The warnings from Meta and Microsoft highlighted their AI infrastructure investments and predicted slower growth in certain business areas, leading to a reevaluation of tech stock valuations. This has heightened volatility in the market. The VIX, known as Wall Street's 'fear gauge,' rose to a three-week high as investors prepared for upcoming corporate earnings reports and election-related uncertainties.

(With inputs from agencies.)