⏬Tech Giants' Earnings Trigger Market Selloff Despite Strong Results
US100 declined sharply, dropping 1.3% after mixed reactions to Microsoft and Meta earnings, despite both companies beating top and bottom-line expectations. The selloff intensified on concerns about elevated AI infrastructure spending and moderating cloud growth outlook.
Key points:
Start investing today or test a free demo
Create account Try a demo Download mobile app Download mobile app- Microsoft shares fell 4.9% despite beating Q3 expectations, primarily due to softer Azure cloud growth guidance
- Meta dropped 2.7% after raising capital expenditure guidance for AI infrastructure
- Market reaction suggests growing concerns about the cost and timeline of Big Tech's AI investments
- Broader tech selloff affecting S&P 500 (-0.87%) and Russell 2000 (-0.80%)
The tech-heavy index's decline reflects growing market anxiety about the sustainability of AI-driven growth and associated costs. While both Microsoft and Meta delivered strong fundamental results, their forward guidance highlighted the massive capital requirements for AI infrastructure development. Microsoft's CFO Amy Hood's comments about slowing Azure growth (31-32% expected in Q2) particularly rattled investors, suggesting the cloud computing boom may be moderating. Microsoft stock drops 4.91% below all SMA levels. It bounced back from October lows. Source: xStation
Meta's announcement of "significant" capital expenditure growth in 2025 for AI infrastructure, while maintaining strong revenue growth, indicates the substantial ongoing investment required to remain competitive in the AI race. This has triggered broader market concerns about tech sector profitability as AI investments ramp up. Meta stock drops 2.7% and retests 30-day SMA. Source: xStation
The market reaction highlights a shifting sentiment where even strong earnings beats may not be enough to sustain recent tech stock momentum if accompanied by higher spending guidance. Focus now turns to upcoming earnings from other tech giants, particularly Amazon and Apple, as investors reassess valuations in light of increasing AI infrastructure costs.
The Nasdaq-100 index, represented by the US100 contract, is currently trading near the 78.6% Fibonacci retracement level after a failed downward breakdown attempt yesterday. For bears to gain control, they must remain below the 78.6% Fibonacci retracement level, followed by the mid-August highs at 19,917.81. These levels have provided significant support during the uptrend that began in late July. A break of these support zones could lead to a test of the 100-day and 50-day SMAs. The RSI is showing signs of bearish divergence, with lower highs and lower lows, while the MACD is starting to widen to the downside, signaling bearish divergence. Despite this, the 50-day SMA is widening against the 100-day SMA after a bullish crossover, which still indicates underlying bullish momentum. Source: xStation 5
The content of this report has been created by XTB S.A., with its registered office in Warsaw, at Prosta 67, 00-838 Warsaw, Poland, (KRS number 0000217580) and supervised by Polish Supervision Authority ( No. DDM-M-4021-57-1/2005). This material is a marketing communication within the meaning of Art. 24 (3) of Directive 2014/65/EU of the European Parliament and of the Council of 15 May 2014 on markets in financial instruments and amending Directive 2002/92/EC and Directive 2011/61/EU (MiFID II). Marketing communication is not an investment recommendation or information recommending or suggesting an investment strategy within the meaning of Regulation (EU) No 596/2014 of the European Parliament and of the Council of 16 April 2014 on market abuse (market abuse regulation) and repealing Directive 2003/6/EC of the European Parliament and of the Council and Commission Directives 2003/124/EC, 2003/125/EC and 2004/72/EC and Commission Delegated Regulation (EU) 2016/958 of 9 March 2016 supplementing Regulation (EU) No 596/2014 of the European Parliament and of the Council with regard to regulatory technical standards for the technical arrangements for objective presentation of investment recommendations or other information recommending or suggesting an investment strategy and for disclosure of particular interests or indications of conflicts of interest or any other advice, including in the area of investment advisory, within the meaning of the Trading in Financial Instruments Act of 29 July 2005 (i.e. Journal of Laws 2019, item 875, as amended). The marketing communication is prepared with the highest diligence, objectivity, presents the facts known to the author on the date of preparation and is devoid of any evaluation elements. The marketing communication is prepared without considering the client’s needs, his individual financial situation and does not present any investment strategy in any way. The marketing communication does not constitute an offer of sale, offering, subscription, invitation to purchase, advertisement or promotion of any financial instruments. XTB S.A. is not liable for any client’s actions or omissions, in particular for the acquisition or disposal of financial instruments, undertaken on the basis of the information contained in this marketing communication. In the event that the marketing communication contains any information about any results regarding the financial instruments indicated therein, these do not constitute any guarantee or forecast regarding the future results.
