US stocks experienced a significant decline in mid-morning trading on Thursday, driven by a selloff in the technology sector as investor concerns regarding AI spending emerged following the recent earnings reports from major tech companies.
The Nasdaq Composite, known for its heavy weighting in technology stocks, led the downturn with a drop of approximately 2.6%. This was largely influenced by a steep decline of over 10% in Microsoft shares following a disappointing earnings report that indicated higher-than-expected capital expenditures and a slowdown in the growth of its cloud services. The S&P 500 and Dow Jones Industrial Average also saw losses, falling by 1.5% and 0.8%, respectively, after Wednesday’s subdued trading session.
In contrast, Meta Platforms saw a rise in its stock price, soaring by more than 7% due to an unexpectedly strong forecast for quarterly revenue. The company announced plans to invest up to $135 billion in its data center expansion this year, reinforcing its commitment to compete robustly in the artificial intelligence sector.
Tesla’s stock was similarly affected, slipping nearly 3% as the company announced a strategic pivot from electric vehicles toward robotics. Although Tesla reported better-than-expected quarterly earnings, it also marked its first decline in annual revenue, raising concerns among investors. With Apple’s earnings report looming after the market closed, attention remains high on tech sector performance.
In wider economic news, concerns regarding escalating tensions between the US and Iran were heightened by President Trump’s warning that Iran must quickly agree to a nuclear deal or face military action. These geopolitical factors contributed to a rise in crude oil prices, which climbed to a four-month high with Brent crude surpassing the $70 per barrel mark. Gold prices also saw a surge, briefly reaching record levels before settling lower, as the weakening dollar drove investors toward safe-haven assets.
Wall Street is currently evaluating the implications of the Federal Reserve’s recent monetary policy decision, which opted to keep interest rates unchanged. While markets are anticipating two potential quarter-point rate cuts by the end of the year, these changes may not occur until after Jerome Powell’s term expires in May. Analysts are closely watching for an announcement regarding Trump’s upcoming nomination for the next Fed chair.
Overall, despite the challenges faced by the tech sector, expectations of future investments in artificial intelligence from companies like Meta offer a glimmer of hope as businesses strive to adapt and innovate in a rapidly changing landscape.