Nasdaq slides over 1% as Alphabet results revive AI spending fears

US stocks were set to open lower on Thursday, as Alphabet's results reignited concerns about escalating AI costs, while investors analyzed fresh data on inflation following the Federal Reserve's decision to maintain interest rates. Alphabet's shares dropped 11.5% in premarket trading, potentially resulting in a loss of over $450 billion in market value if the decline persists.

The Google parent's decline contributed to the Nasdaq-100's anticipated loss of more than $660 billion in market value. Tech analyst Anders Bylund stated that the positive AI effects must endure for years, or investors in Alphabet and other hyperscalers could eventually adjust the multiples as bottom-line profits diminish. Microsoft rose 1.8% after reporting a significant cash-flow beat and forecasting robust cloud growth; however, it retraced gains in response to reports of its intention to raise at least $25 billion via its first US investment-grade bond sale in over nine years.

Investor interest in AI investments has been diluted this month due to worries that debt-driven spending will become harder to justify as borrowing costs rise. Despite the presence of strong and resilient economic growth, with inflation and prices moving further away from the Federal Reserve's target, analysts predict that the Fed is likely to skip rather than hold on to interest rates in October.

The Fed held interest rates steady on Wednesday, as anticipated, intending to postpone any adjustments to borrowing costs until after the upcoming US midterm elections.