Tech Tumble: Market Reacts to AI Spending Surge and Fed's Hawkish Tone

Wall Street's major indexes fell, led by Nasdaq and S&P 500, as tech giants like Meta and Microsoft saw shares drop due to concerns over AI spending. The Federal Reserve's hawkish stance further worried investors. Only Google-parent Alphabet bucked the trend with its better-than-expected earnings.

The major indexes on Wall Street took a hit on Thursday as tech giants led the decline following investor concerns over increasing AI expenditures. The Nasdaq Composite and the S&P 500 experienced significant drops, largely driven by a notable 11.3% decline in Meta's shares, marking its steepest one-day slide in three years. Microsoft's shares also fell by 2.9% after it reported substantial spending on capital expenditures.

In contrast, Google-parent Alphabet provided a bright spot by climbing 2.5%, thanks to strong performance in advertising and cloud services. The downturn occurred despite the Federal Reserve's expected interest rate cut, with Fed Chair Jerome Powell cautioning against assumptions of further cuts in December, creating more uncertainty in the market.

Despite these concerns, there remains an air of optimism surrounding AI, fueling U.S. stock markets' overall bull run this year. Even as some tech earnings failed to meet heightened expectations, investors continue to eye the potential of AI-related growth while remaining cautious of potential economic data impacts from a government shutdown and tempered monetary policy hopes.

(With inputs from agencies.)