Nasdaq futures fell 1.3%: Alphabet's earnings report could halt the tech rally

The global rally in tech stocks has stalled after earnings reports from two industry giants reignited market doubts that multibillion-dollar investments in artificial intelligence will yield sufficient returns, according to Bloomberg. Nasdaq 100 index futures plummeted 1.3%, and if this trend continues during the main trading session, it will end a three-day winning streak.

The main source of pressure on the sector is Alphabet’s stock, which plummeted more than 10% in premarket trading. The company’s results fell short of expectations, fueling concerns that Google is losing ground to its competitors in the AI sector, despite having invested hundreds of billions of dollars.

Samsung Electronics shares fell 4.1%: investors were disappointed by the lack of a new plan to return capital to shareholders, the semiconductor division’s profits came in below forecasts, and capital expenditures rose.

These reports have revealed new weaknesses in the AI investment strategy and reinforced doubts that large-scale investments in the technology will pay off quickly enough to justify the companies’ high valuations, Bloomberg explains.

“Expectations were already extremely high, so simply meeting them is no longer enough,” noted Wataru Akiyama, a strategist at Nomura Securities. “If companies are unable to demonstrate earnings growth that exceeds even these high forecasts, their stock prices could fall after the earnings reports are released.”

Microsoft shares, which also reported earnings the day before, rose 3.8% in premarket trading as growth in its Azure cloud business helped the company beat analysts’ expectations. At the same time, the company’s capital expenditures came in below expectations, leading to a sharp decline in the stock prices of non-cloud providers. Nebius shares plummeted 6.5%, while CoreWeave lost 5.6% of its market value.

Amazon's earnings report will be the next test of investor sentiment, according to Bloomberg. The report will be released after the market closes on Thursday, October 29.

This article was AI-translated and verified by a human editor