US100 dips 1.3% 📉

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:

• 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