Dow Jones futures slip as tech-driven rally loses momentum
- Dow, S&P 500, and Nasdaq futures fall following earnings reports from Tesla and Meta Platforms.
- Tesla dropped nearly 5% despite beating estimates, while Meta edged slightly lower after its Q3 update.
- Traders now turn their focus to key earnings from P&G, Western Digital, and Lockheed Martin.
Dow Jones futures decline by 0.58% to trade near 52,750 during European hours on Thursday. S&P 500 futures fall 0.97% to trade around 7,720, while Nasdaq 100 futures plunge 1.69% to trade near 29,500.
US stock futures fall as investors evaluated the latest quarterly earnings reports from key technology players, Tesla and Meta Platforms. The previous session's tech-led rally, which was driven by strong corporate earnings and growing enthusiasm around artificial intelligence, began to lose momentum ahead of the opening bell.
In pre-market trading, Tesla shares declined by nearly 5% despite beating Wall Street expectations on both earnings and revenue. Meanwhile, Meta shares edged slightly lower by 0.36% after reporting stronger-than-anticipated third-quarter revenue and offering a positive outlook for the upcoming quarter. Market participants are now turning their attention to upcoming earnings reports on Thursday from notable companies including Procter & Gamble (P&G), Western Digital, and Lockheed Martin.
Tesla capex pullback tempers AI transition optimism
According to Deutsche Bank, investor focus remained firmly on longer-term investment plans, with management noting that the company “slightly boosted its 2026 capex plan from a $130bn-145bn range to $135bn-145bn.” By contrast, Deutsche Bank highlights that “Tesla fell by -5% after-hours after it cut its 2026 capex target from $25bn to $20bn,” a move that “raised questions about the speed of its transition into AI and robotics,” even as “current revenue and earnings were close to expectations.”
This pause in momentum follows a solid regular trading US session on Wednesday, where the Dow Jones and S&P 500 advanced by 0.69% and 0.58%, respectively. The tech-heavy Nasdaq Composite led gains with a 1.05% rally, buoyed by strong financial results from SpaceX and Super Micro Computer that reinforced investor confidence in AI demand.
AI stocks FAQs
First and foremost, artificial intelligence is an academic discipline that seeks to recreate the cognitive functions, logical understanding, perceptions and pattern recognition of humans in machines. Often abbreviated as AI, artificial intelligence has a number of sub-fields including artificial neural networks, machine learning or predictive analytics, symbolic reasoning, deep learning, natural language processing, speech recognition, image recognition and expert systems. The end goal of the entire field is the creation of artificial general intelligence or AGI. This means producing a machine that can solve arbitrary problems that it has not been trained to solve.
There are a number of different use cases for artificial intelligence. The most well-known of them are generative AI platforms that use training on large language models (LLMs) to answer text-based queries. These include ChatGPT and Google’s Bard platform. Midjourney is a program that generates original images based on user-created text. Other forms of AI utilize probabilistic techniques to determine a quality or perception of an entity, like Upstart’s lending platform, which uses an AI-enhanced credit rating system to determine credit worthiness of applicants by scouring the internet for data related to their career, wealth profile and relationships. Other types of AI use large databases from scientific studies to generate new ideas for possible pharmaceuticals to be tested in laboratories. YouTube, Spotify, Facebook and other content aggregators use AI applications to suggest personalized content to users by collecting and organizing data on their viewing habits.
Nvidia (NVDA) is a semiconductor company that builds both the AI-focused computer chips and some of the platforms that AI engineers use to build their applications. Many proponents view Nvidia as the pick-and-shovel play for the AI revolution since it builds the tools needed to carry out further applications of artificial intelligence. Palantir Technologies (PLTR) is a “big data” analytics company. It has large contracts with the US intelligence community, which uses its Gotham platform to sift through data and determine intelligence leads and inform on pattern recognition. Its Foundry product is used by major corporations to track employee and customer data for use in predictive analytics and discovering anomalies. Microsoft (MSFT) has a large stake in ChatGPT creator OpenAI, the latter of which has not gone public. Microsoft has integrated OpenAI’s technology with its Bing search engine.
Following the introduction of ChatGPT to the general public in late 2022, many stocks associated with AI began to rally. Nvidia for instance advanced well over 200% in the six months following the release. Immediately, pundits on Wall Street began to wonder whether the market was being consumed by another tech bubble. Famous investor Stanley Druckenmiller, who has held major investments in both Palantir and Nvidia, said that bubbles never last just six months. He said that if the excitement over AI did become a bubble, then the extreme valuations would last at least two and a half years or long like the DotCom bubble in the late 1990s. At the midpoint of 2023, the best guess is that the market is not in a bubble, at least for now. Yes, Nvidia traded at 27 times forward sales at that time, but analysts were predicting extremely high revenue growth for years to come. At the height of the DotCom bubble, the NASDAQ 100 traded for 60 times earnings, but in mid-2023 the index traded at 25 times earnings.
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