US stocks turned lower on Thursday as investors weighed fresh earnings from mega cap tech firms, which pointed to another major jump in AI related spending. While the Federal Reserve kept interest rates unchanged as expected, markets focused more on whether Big Tech’s heavy AI investments are paying off fast enough.
The S&P 500 erased early gains, and the Nasdaq fell about 1%, dragged down mainly by weakness in top technology and software names.
Microsoft Drops, Raising AI Monetization Concerns
Microsoft shares sank 11.3%, putting major pressure on the Nasdaq. Investors were disappointed by its cloud revenue performance, which sparked worries that Microsoft’s huge spending tied to its OpenAI partnership may not be turning into profits quickly enough.
This added fuel to a growing Wall Street debate: AI spending is rising fast, but returns are still unclear.
Software Stocks Sink After Weak Outlooks
Software companies also weighed on markets after cautious results and outlooks:
- SAP issued a careful cloud outlook
- ServiceNow dropped nearly 10% after earnings
These moves deepened investor concerns that traditional software firms may struggle as competition from newer AI driven players grows.
Other software names also slid:
- Salesforce fell 5.6%
- Adobe lost 3.1%
- Datadog dropped 3.1%
The broader tech sector also weakened, with the technology index falling around 3%.
Meta Surges, Tesla Slips Despite Higher Spending Plans
Not all Big Tech moved lower.
Meta jumped almost 8% after giving a strong revenue forecast and announcing a 73% increase in 2025 capex, showing the company is doubling down on infrastructure and AI investment.
Tesla fell 1%, even though it said it plans to more than double capital spending to a record level.
Analysts said investors are still willing to accept large AI budgets, but only if the payoff becomes visible.
Market Snapshot (Morning Trading)
At around 9:56 a.m. ET:
- Dow Jones rose 98 points (+0.20%) to 49,114
- S&P 500 fell 23 points (−0.33%) to 6,954
- Nasdaq Composite dropped 248 points (−1.04%) to 23,609
Apple shares were slightly lower ahead of its earnings release after the market close.
Other Earnings Winners: Caterpillar, IBM, Lockheed
Outside tech, several major companies gained after strong earnings updates:
- Caterpillar rose 3.5%
- Mastercard gained 0.7%
- Lockheed Martin surged almost 8% after forecasting 2026 earnings above expectations
- Southwest Airlines jumped 12.4% after projecting stronger annual profit
- IBM climbed 6% after beating Q4 estimates
Industrial stocks were stronger overall, with the industrial index up about 1%.
Energy Rises as Oil Prices Climb
Energy stocks gained as oil prices rose due to increasing concerns about a potential US military strike on Iran. The S&P energy index added roughly 2%.
Fed Holds Rates, Jobless Claims Improve Slightly
Economic data showed initial jobless claims dipped to 209,000, suggesting layoffs remain relatively low, even as hiring stays weak.
Fed Chair Jerome Powell repeated that the central bank will stay data dependent. Traders still expect the first rate cut in June, based on CME FedWatch pricing.
Rare Earth Stocks Slide on Policy Report
Rare earth miners fell sharply after a report said the Trump administration may step back from critical mineral price floors:
- USA Rare Earth fell 16%
- MP Materials dropped 10%
- Critical Metals fell over 14%
- United States Antimony fell over 14%
