AI Trading Alert: Microsoft’s Cost Warning Sparks Fears of Wall Street and Meta Downfall

Wall Street opened lower on Thursday as warnings about rising artificial intelligence costs from Metaplatform and Microsoft quieted buzz about megacap stocks that have been the market’s main drivers this year.

Facebook owner Meta said both companies reported better-than-expected results in earnings released after the opening bell on Wednesday. META’s stock price is 1.4%, Microsoft MSFT was down in pre-market trading, down 3.5%.

Meanwhile, the Federal Reserve’s preferred measure of inflation, the personal consumption expenditures price index, rose 0.2% in September (link), in line with economists’ expectations and supporting bets on a gradual easing of monetary policy by the U.S. central bank. .

“Investors are placing more importance on the performance of Microsoft and Meta than economic news,” said Peter Cardillo, chief markets economist at Spartan Capital Securities.

“Still, the inflation news could increase the likelihood that the Federal Reserve will keep interest rates on hold next week, which could unsettle investors and have a further negative impact in the medium term.”

Labor Department data shows that new unemployment claims fell last week to a better-than-expected 216,000 as distortions from the hurricane faded (link). Monthly nonfarm payrolls data is due on Friday.

Meta (link) warned of a “significant acceleration” in AI infrastructure investment. Microsoft (link) has already signaled that its massive AI investments are not enough to keep pace with capacity constraints, predicting slowing growth in its Azure cloud business.

Other so-called ‘Magnificent Seven’ stocks also fell, including Nvidia NVDA down 1.1%, Alphabet GOOG fell 0.3%, giving up some gains after a sharp rise due to good performance the previous day (link).

Amazon.com AMZN fell 1.3% and Apple AAPL fell 0.1% ahead of quarterly results to be released after the market closes.

Bets on AI-driven technology stocks have driven Wall Street to record highs this year, but investors are overheated and stocks are trading at incredibly expensive valuations. The warnings from Meta and Microsoft point out the difficulties companies face in satisfying investors.

“The market is unforgiving of AI-related companies that don’t deliver significant results,” says Dan Coatsworth, investment analyst at aJ Bell.

“Meta is the latest stock to feel the ire of investors despite performing better than analyst forecasts on key financial metrics.”

S&P 500 e-Mini ES1! fell 37.75 points, or 0.64%. Nasdaq 100 e-Mini NQ1! is 138.5 points (0.67%), Dow e-mini YM1! fell 220 points (0.52%)

The volatility index (VIX), called Wall Street’s ‘fear gauge’ The VIX rose to its highest in three weeks as investors braced for increased volatility due to corporate earnings, the upcoming U.S. presidential election and central bank meetings in November.

The benchmark index is expected to rise for a sixth consecutive month in October, with the Nasdaq Composite Index IXIC is expected to rise more than 2%, but the Dow DJI is expected to decline slightly.

E-commerce company eBay moves to focus on performance EBAY fell 5.7% due to a lowered sales (link) forecast, and trading platform Robinhood HOOD plunged 9.1% after its third quarter results (link) missed expectations.

Uber Technologies UBER shares fell 8.2% after the company forecast fourth-quarter total reservations (link) would fall below expectations.

Shares of cosmetics company Estee Lauder ( (link) ) plunged 23.8% after withdrawing its full-year forecast for 2025 and cutting its dividend.

Of the S&P 500 companies that have reported earnings so far, 77.4% have beaten analysts’ estimates, roughly in line with the average beat rate of 79% over the past four quarters, according to LSEG data as of Wednesday.