Nasdaq futures decline as Alphabet sparks tech selloff

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Nasdaq futures decline

Highlights

Nasdaq 100 futures fell 1.24%.
Alphabet slid 10.4% on AI spending fears.
Investors await U.S. inflation data.

Nasdaq 100 futures declined 1.24% to 29,608.75. Reuters reported that Alphabet's weak search advertising performance and accelerating AI spending weighed on investor sentiment, although Microsoft's results offered a more encouraging picture of returns on technology investments.

Alphabet selloff raises questions over AI investment

Alphabet shares dropped 10.4% in premarket trading, putting the Google parent on course to lose more than $400 billion in market capitalization if the decline persists. Investors focused on weaker advertising results and rising cash consumption as the company increased spending on AI infrastructure, raising questions about how quickly those investments can generate sufficient revenue.

Microsoft provided a contrast, gaining 2.1% after reporting stronger-than-expected cash flow and forecasting solid cloud growth. The divergence highlighted growing scrutiny of major technology companies, with investors increasingly distinguishing between AI spending supported by measurable business gains and expenditure whose financial returns remain uncertain.

Selling extended beyond Alphabet. Fortinet plunged 26.6% following its quarterly results, while ServiceNow declined 19.6% after missing profit estimates. Zscaler and Salesforce also faced pressure amid broader weakness in software shares. Semiconductor stocks retreated, with Nvidia down approximately 0.5%, AMD losing 2.5% and Intel falling 3.5%.

Corporate earnings expose wider market pressure

Other earnings announcements reinforced the uneven outlook for U.S. equities. Caterpillar dropped 9.7% following its third-quarter results, while Eli Lilly gained 3.9% after issuing an annual revenue forecast above Wall Street expectations.

Marvell Technology declined 12.4% following reports of advanced acquisition discussions involving data center optics company Lumentum Holdings, whose shares rose 4.8%. The contrasting moves showed how company-specific developments continued to influence trading alongside broader concerns about technology valuations.

Inflation data and Fed policy shape market expectations

Investors are also reassessing technology valuations after the Federal Reserve held its benchmark interest rate at 3.75% to 4% on Wednesday. Higher borrowing costs could make debt-financed AI expansion more expensive, increasing pressure on companies to demonstrate returns from their investments.

The previous session ended with the Dow Jones at 52,475, up 0.17%, and the S&P 500 at 7,743, up 0.28%. Those closing gains contrast with Thursday's decline in Nasdaq futures, suggesting that selling pressure is particularly concentrated in technology shares rather than evenly distributed across the market.

The upcoming inflation report could influence expectations for the Fed's December decision. For investors, the immediate concern is whether strong cloud revenue and AI demand can justify the industry's growing capital commitments as monetary policy remains restrictive.

We also reported gold approaches $4,000 as investors assess Fed rate outlook.

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