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Dow Jones futures edge lower as technology-led rally fades
- Earnings updates from Tesla and Meta Platforms leave Dow, S&P 500 and Nasdaq futures lower.
- An earnings beat failed to prevent Tesla from losing nearly 5%; Meta also slipped following its Q3 results.
- Upcoming results from P&G, Western Digital and Lockheed Martin take centre stage for traders.
A 0.58% fall leaves Dow Jones futures near 52,750 in Thursday’s European trading. With S&P 500 futures down 0.97% at around 7,720, Nasdaq 100 futures record the steepest decline, dropping 1.69% to near 29,500.
The latest quarterly results from technology heavyweights Tesla and Meta Platforms are under scrutiny as US stock futures retreat. Ahead of the opening bell, momentum is fading from the previous session’s technology-led advance, which drew support from robust corporate earnings and mounting enthusiasm for artificial intelligence.
Despite earnings and revenue exceeding Wall Street forecasts, Tesla shares lost nearly 5% in pre-market dealing. Stronger-than-expected third-quarter revenue and an upbeat outlook for the coming quarter also failed to lift Meta, whose shares slipped 0.36%. Attention is shifting to Thursday’s forthcoming results from companies including Procter & Gamble (P&G), Western Digital and Lockheed Martin.
Tesla’s capex cut cools optimism over AI transition
Longer-term investment intentions continued to dominate investors’ attention, according to Deutsche Bank. Management noted that the company “slightly boosted its 2026 capex plan from a $130bn-145bn range to $135bn-145bn.” Deutsche Bank contrasted this with Tesla, highlighting that “Tesla fell by -5% after-hours after it cut its 2026 capex target from $25bn to $20bn,” which “raised questions about the speed of its transition into AI and robotics,” although “current revenue and earnings were close to expectations.”
Wednesday’s firm regular US trading session preceded this loss of momentum, with the Dow Jones and S&P 500 gaining 0.69% and 0.58%, respectively. Leading the advance, the technology-heavy Nasdaq Composite rose 1.05%. Strong results from SpaceX and Super Micro Computer underpinned the gains and bolstered investors’ confidence in demand for AI.
AI stocks: key questions answered
As an academic discipline, artificial intelligence seeks to replicate human cognitive functions, logical understanding, perception and pattern recognition in machines. Commonly shortened to AI, the field encompasses artificial neural networks, machine learning or predictive analytics, symbolic reasoning, deep learning, natural language processing, speech recognition, image recognition and expert systems. Its ultimate objective is artificial general intelligence, or AGI: a machine capable of solving arbitrary problems without having been trained to tackle them.
Artificial intelligence has a wide range of applications, the best known being generative AI platforms trained on large language models (LLMs) to respond to text-based questions. ChatGPT and Google’s Bard platform are examples, while Midjourney produces original images from text supplied by users. Elsewhere, probabilistic techniques allow AI to assess an entity’s characteristics or how it is perceived. Upstart’s lending platform, for example, employs an AI-enhanced credit rating system to assess applicants’ creditworthiness by searching the internet for information about their careers, wealth profiles and relationships. Drawing on extensive databases of scientific studies, other AI systems propose ideas for potential pharmaceuticals to undergo laboratory testing. By collecting and organising information on viewing habits, YouTube, Spotify, Facebook and other content aggregators use AI to recommend personalised content to users.
Alongside AI-focused computer chips, semiconductor company Nvidia (NVDA) develops some of the platforms engineers rely on to create AI applications. Because it supplies the tools needed to develop further uses for artificial intelligence, many supporters regard Nvidia as a pick-and-shovel investment in the AI revolution. Large contracts with the US intelligence community are a feature of “big data” analytics company Palantir Technologies (PLTR). Intelligence agencies use its Gotham platform to examine data, identify intelligence leads and assist with pattern recognition. Major corporations use its Foundry product to monitor employee and customer data, supporting predictive analytics and the detection of anomalies. A substantial stake in OpenAI, the privately held creator of ChatGPT, is owned by Microsoft (MSFT). OpenAI’s technology has also been incorporated into Microsoft’s Bing search engine.
The public launch of ChatGPT in late 2022 set off a rally in many AI-related shares. In the six months after its release, Nvidia, for example, gained well over 200%, prompting immediate questions from Wall Street commentators about another technology bubble. Renowned investor Stanley Druckenmiller, who has held substantial investments in both Palantir and Nvidia, argued that bubbles never last just six months. If enthusiasm for AI were to develop into a bubble, he said, extreme valuations would persist for at least two and a half years or longer, as they did during the DotCom bubble in the late 1990s. At the midpoint of 2023, the best assessment was that the market was not in a bubble, at least for the time being. Although Nvidia then traded at 27 times forward sales, analysts anticipated exceptionally strong revenue growth for years ahead. For comparison, the NASDAQ 100’s valuation reached 60 times earnings at the DotCom bubble’s peak, against 25 times earnings in mid-2023.
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