AI Investments and Fed Policy Shake U.S. Markets

The S&P 500 and Nasdaq Composite saw declines amid fears over increased AI spending by Meta and Microsoft, alongside a hawkish U.S. Federal Reserve stance. Despite the decline, strong earnings reports highlight a robust economy, though investor confidence remains tested by concerns over future interest rate cuts.

On Thursday, the S&P 500 and Nasdaq Composite experienced setbacks as investor anxiety mounted over surging AI-related expenditures by tech giants Meta and Microsoft. This was compounded by a more hawkish outlook from the U.S. Federal Reserve.

Meta's shares plummeted nearly 11% following forecasts of substantially larger capital expenses due to AI investments next year, making it their largest drop in three years. Meanwhile, Microsoft's stock dipped by 3% after revealing record capital expenses of nearly $35 billion for its fiscal first quarter and anticipating increased spending for the year.

Investor sentiment was further jarred by the Federal Reserve's decision to hold off on a December rate cut, as indicated by Chair Jerome Powell's comments. Though earnings reports revealed 84.2% of 222 S&P 500 companies beat expectations, market unease persists due to growing uncertainty in monetary policies.

(With inputs from agencies.)