US stocks continued to come under pressure from declines in AI-related shares last week, with Meta Platforms plunging and financial concerns emerging. This week, earnings from Microsoft and Alphabet and the 3 November midterm elections will be the focus.
AI stocks weighed heavily on US equities last week, with the S&P 500 and Nasdaq trading lower. Resource and healthcare stocks, meanwhile, rose, allowing the Dow Jones Industrial Average to rebound modestly on a relative basis. As declines in AI-related shares continued, movements in crude oil prices and long-term interest rates drove localized market moves.
CoreWeave, the emerging AI cloud company that triggered the sharp drop in AI stocks, fell 11.6% from the previous Friday amid lingering credit concerns over its massive debt burden. As earnings announcements continued from mid-June, Meta Platforms released its results for the June quarter, renewing concerns about excessive AI investment and weighing on the market.
Meta's earnings showed a substantial upward revision to its outlook for AI capital spending in fiscal 2026, and the company also announced a stock split. This heightened concerns about excessive investment without corresponding profitability. Meta shares consequently fell sharply for the week, while leading semiconductor company Lam Research also continued to decline after lowering its profit outlook.
Earnings announcements from Microsoft and Alphabet are due this week, with the profitability and scale of their AI cloud businesses expected to be the focus. With the FOMC decision also pending, the US market is expected to remain cautious through 3 November, and a clear market direction is considered unlikely to emerge before the midterm elections.