AI Costs Shake U.S. Stock Market as Tech Giants Report

U.S. stock indexes fell as Microsoft and Meta highlighted escalating AI expenses impacting earnings, dampening enthusiasm for major tech stocks. Despite beating estimates, shares of Meta and Microsoft dropped. The market faced volatility due to increasing AI investment concerns and looming Fed rate decisions.

On Thursday, U.S. stock indexes closed lower, shaken by the financial impact of burgeoning artificial intelligence (AI) costs reported by tech giants Microsoft and Meta Platforms. The market's enthusiasm for megacap stocks, which have driven gains throughout the year, was tempered by concerns over earnings.

In particular, Meta Platforms, the parent company of Facebook, saw its shares fall by 4.1%, while Microsoft experienced a 6% drop. Despite both companies surpassing earnings expectations in reports released after Wednesday's trading session, investors reacted negatively to open-ended AI budgets. Members of the 'Magnificent Seven' technology firms, including Amazon and Apple, also saw varying results post-market close.

The broader market environment was further pressured by inflation metrics and Federal Reserve rate speculations. The Dow Jones Industrial Average decreased by 378.08 points, while the S&P 500 and Nasdaq Composite also experienced losses. As volatility is expected to continue amidst corporate earnings announcements and upcoming Fed meetings, sectors like information technology faced notable declines.

(With inputs from agencies.)