NEW YORK: Fears of a potential hit to artificial-intelligence (AI) funding due to higher interest rates drove Nasdaq futures down more than 1% on Thursday, deepening a selloff in AI-related stocks.
The Nasdaq and the S&P 500 marked their biggest one-day drop since July on Wednesday, after hotter-than-expected inflation data fueled expectations of more interest rate hikes from the US Federal Reserve and sent tech stocks tumbling.
Further denting sentiment on Thursday, TSMC, the world's largest manufacturer of advanced chips, struck a cautious note for 2027 due to macroeconomic uncertainties after reporting its sixth consecutive record quarterly profit.
Reports that AI lab Anthropic reported a 45% surge in third-quarter revenue compared to the previous quarter also failed to lift investor spirits.
CoreWeave, a heavily indebted data-centre operator in the eye of the recent tech storm, fell another 6.3% in premarket trading following a 15% drop on Wednesday.
Cloud computing giant Oracle fell 2.1% after a nearly 9% drop in the previous session. The companies' bonds also came under pressure, pushing their yields to record highs.
CoreWeave and Oracle, along with other chipmakers, hyperscalers and cloud companies, looked set for a second day of sharp declines.
Nvidia fell 1.8%, while Micron Technology and Advanced Micro Devices dropped 3.7% and 2.3%, respectively.
"A slowdown in the AI infrastructure build-out would imply a sharp slowdown in US growth expectations," said Mohit Kumar, an economist at Jefferies.
"We expect the earnings season to justify that earnings and demand remain robust," he said, noting that Jefferies would look to take some chips off the table ahead of the midterm election.
At 5:50 am, Dow E-minis rose 165 points, or 0.32%, S&P 500 E-minis fell 21 points, or 0.27%, and Nasdaq 100 E-minis lost 331.5 points, or 1.1%.
Investors will keep a close eye on producer price data at 8.30am for clues on factory inflation.
September retail sales, initial jobless claims data and several business surveys are also due to be released later in the day.
Traders are pricing in a 27% chance of a central bank rate hike later this month, according to CME Group's FedWatch tool, up from 20% a week ago.
Meanwhile, the odds of a 25-basis-point hike in December stood at 67%.
The Nasdaq has dropped more than 3% from record highs it touched last week, with concerns about higher interest rates and AI spending threatening to overshadow what is forecast to be a solid earnings season.
Analysts expect S&P 500 profits to grow 30.6% in the third quarter, according to LSEG data, with technology and energy companies doing the heavy lifting.
Shares of Rocket Lab dropped 9.7% after the space company said the inaugural launch of its new, larger Neutron rocket was delayed until next year.