Wall Street slides to over one-week low

NEW YORK: Wall Street’s main indexes slid to over one-week lows on Thursday, as another wave of hefty AI-related spending announcements by mega-cap tech companies rattled investors.

Microsoft slumped 12.2 percent after the software giant’s cloud revenue failed to impress and stoked fears the hefty outlays behind its OpenAI alliance were not translating into monetization fast enough.

Tesla also reversed course, down 2.3 percent, after the electric-vehicle maker outlined plans to more than double capital expenditures to a record level.

“People have just been throwing money and now they’ve reached a certain level where they’re starting to look under the hood and see what’s really going on,” said Max Wasserman, Co-founder and Senior Portfolio Manager at Miramar Capital.

Also weighing on markets was a drop in software stocks, after SAP’s cautious cloud outlook and ServiceNow’s post-earnings slide of 10 percent deepened investor concerns that traditional software firms risk losing ground to rising competition from AI players.

Salesforce was down 7.2 percent, while Adobe lost 3.9 percent and cloud security firm Datadog fell 8.3 percent.

At 11:18 a.m. ET, the Dow Jones Industrial Average fell 204.00 points, or 0.42 percent, to 48,811.60, the S&P 500 lost 78.68 points, or 1.13 percent, to 6,899.35 and the Nasdaq Composite lost 502.65 points, or 2.11 percent, to 23,354.80.

Meta bucked the trend, jumping almost 8 percent, as the social media giant paired an upbeat revenue forecast with a 73 percent jump in this year’s capex budget.

The so-called “Magnificent Seven” stocks have been at the heart of the US bull market, as investors wager that their hefty AI investments will drive a new phase of earnings growth.

The group is projected to deliver a 21.5 percent earnings increase in the fourth quarter, compared with a 5.3 percent gain for the rest of the S&P 500, according to data compiled by LSEG.

But with capital expenditures and AI-related outlays climbing far faster than the revenue they are generating, markets are starting to question whether the payoff from these multibillion-dollar AI bets will arrive quickly enough to justify valuations.