Dow Jones futures edge lower as tech-led rally loses steam

Following results from Tesla and Meta Platforms, futures on the Dow, S&P 500 and Nasdaq retreat.
Nearly 5% was wiped off Tesla shares despite forecast-beating results; Meta slipped after its Q3 update.
Next on traders’ earnings agenda are P&G, Western Digital and Lockheed Martin.

Dow Jones futures are down 0.58%. The contracts trade near 52,750 during Thursday’s European session. A 0.97% decline takes S&P 500 futures to around 7,720, while Nasdaq 100 futures slide 1.69% to near 29,500.

As investors assess the latest quarterly results from technology heavyweights Tesla and Meta Platforms, US equity futures retreat. Before the opening bell, momentum is fading from the previous session’s technology-led advance. Strong corporate results and mounting enthusiasm for artificial intelligence had fuelled that rally.

TMGM Analysis: Financial Market News, Economic Calendar & Market Insights

Despite earnings and revenue exceeding Wall Street forecasts, Tesla shares fell nearly 5% in pre-market dealing. Meta, meanwhile, slipped 0.36%, even after delivering better-than-expected third-quarter revenue and an upbeat outlook for the next quarter. Attention now shifts to Thursday’s forthcoming results from companies including Procter & Gamble (P&G), Western Digital and Lockheed Martin.

2026 capex cut clouds Tesla’s AI transition outlook

Longer-term investment plans remained investors’ central concern, according to Deutsche Bank. Management said the company “slightly boosted its 2026 capex plan from a $130bn-145bn range to $135bn-145bn.” In contrast, Deutsche Bank notes 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 strong regular US trading session preceded this loss of momentum. Gains of 0.69% for the Dow Jones and 0.58% for the S&P 500 were outpaced by the technology-heavy Nasdaq Composite, which climbed 1.05%. Robust results from SpaceX and Super Micro Computer bolstered confidence in AI demand and supported the advance.

AI stocks: key questions

Artificial intelligence: scope and objectives

At its core, artificial intelligence is an academic field focused on reproducing human cognitive functions, logical understanding, perception and pattern recognition in machines. Commonly shortened to AI, it encompasses artificial neural networks, machine learning or predictive analytics, symbolic reasoning, deep learning, natural language processing, speech recognition, image recognition and expert systems. The field’s ultimate objective is artificial general intelligence, or AGI: a machine capable of solving arbitrary problems for which it has received no specific training.

AI applications and practical uses

Artificial intelligence serves a wide range of purposes. Among the best-known applications are generative AI platforms, including ChatGPT and Google’s Bard platform, which are trained on large language models (LLMs) to respond to text-based questions. With Midjourney, users supply text prompts from which the programme creates original images. Probabilistic techniques underpin other AI systems that assess an entity’s characteristics or how it is perceived. One example is Upstart’s lending platform. Its AI-enhanced credit rating system assesses applicants’ creditworthiness by searching the internet for information about their careers, wealth profiles and relationships. Elsewhere, AI draws on extensive databases of scientific studies to propose potential pharmaceuticals for laboratory testing. Content aggregators such as YouTube, Spotify and Facebook collect and organise users’ viewing-habit data, then apply AI to recommend personalised content.

Stocks with exposure to AI

Semiconductor company Nvidia (NVDA) produces AI-focused computer chips as well as some of the platforms engineers use to develop AI applications. By supplying the tools for further AI development, Nvidia is regarded by many proponents as a picks-and-shovels investment in the AI revolution. Another company in the field is Palantir Technologies (PLTR), a “big data” analytics business with substantial US intelligence community contracts. Intelligence agencies use its Gotham platform to filter data, identify intelligence leads and support pattern recognition. Major corporations use its Foundry product to monitor employee and customer data for predictive analytics and anomaly detection. Microsoft (MSFT), meanwhile, owns a substantial stake in OpenAI, the privately held creator of ChatGPT. OpenAI’s technology has been incorporated into Microsoft’s Bing search engine.

AI and the risk of another equity bubble

The public launch of ChatGPT in late 2022 sparked gains across many AI-linked shares. In the six months after its release, for example, Nvidia rose well over 200%. Wall Street commentators soon questioned whether another technology bubble was taking hold. Renowned investor Stanley Druckenmiller, whose investments have included large positions in both Palantir and Nvidia, argued that bubbles never last just six months. Should AI enthusiasm 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. By 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 expected exceptionally strong revenue growth for years ahead. The NASDAQ 100’s valuation also stood at 25 times earnings in mid-2023, compared with 60 times earnings at the DotCom bubble’s peak.