Wall Street Sentiment Shaken by AI Cost Warnings from Meta and Microsoft

Wall Street futures fell after Meta Platforms and Microsoft raised concerns about rising AI-related costs. Despite beating earnings estimates, Meta and Microsoft's warnings hit investors' confidence. Other tech giants also faced declines amid these anxieties, as markets await key economic data releases.

Wall Street faced a significant downturn on Thursday, driven by growing concerns over rising AI-related costs at major tech firms Meta Platforms and Microsoft. This development dampened earlier sentiments around megacap stocks, which had been a substantial market driver throughout the year.

In a marked premarket reaction, shares of Meta fell by 3.5%, while Microsoft experienced a 3.9% decline. Both companies exceeded earnings expectations but issued cautionary statements about future AI infrastructure investments. Investors are also focused on upcoming economic data, including the Personal Consumption Expenditures index and nonfarm payrolls data, for indications of the Federal Reserve's monetary strategy through the end of 2024.

The financial landscape anticipates increased volatility, with the VIX index climbing to a three-week high. This instability is exacerbated by uncertainties linked to upcoming corporate earnings reports, the U.S. presidential election, and scheduled Federal Reserve meetings. As the Nasdaq Composite trends upwards, firms like eBay and Robinhood also revealed downward stock adjustments following underwhelming financial forecasts.

(With inputs from agencies.)