Market Turmoil: AI Costs Weigh on Stocks

U.S. stocks dropped as Microsoft and Meta revealed rising AI costs impacting earnings, diminishing enthusiasm for megacap stocks. Both companies fell despite beating earnings estimates. This and rising Treasury yields pressured equities, while AI investments pose long-term implications for U.S. growth and productivity.

U.S. stocks experienced a downturn on Thursday following revelations from Microsoft and Meta Platforms about increasing artificial intelligence costs potentially affecting earnings, dampening investor enthusiasm for megacap stocks driving this year's market rally.

Shares of Meta Platforms, Facebook's parent company, fell by 4.5%, and Microsoft decreased by 5.6% despite surpassing earnings estimates. Other significant tech stocks such as Amazon and Apple also declined ahead of their quarterly results. Alphabet, who reported on Tuesday, saw a drop of 1.7%.

The pressures on equities increased with a rise in the benchmark 10-year Treasury note yield, while AI investments led by tech giants suggest significant implications for long-term U.S. growth. Investors remain apprehensive about immediate profitability amid broader market volatility spurred by the upcoming U.S. presidential election and Federal Reserve policy discussions.

(With inputs from agencies.)