On what turned out to be another tough day for tech companies, U.S. stock futures were looking steady on Wednesday, with Wall Street keenly observing Micron’s results for insights into AI demand.
Futures for the Nasdaq 100 increased by 0.5% and those for the S&P 500 went up by 0.1%. However, stocks focused on AI took a hit, and despite that, the indexes managed to close without major losses. In contrast, the Dow Jones Industrial Average, which includes fewer tech companies, saw its number of contracts drop by 0.1%.
Market worries about high valuations and substantial spending, paired with speculation over potential interest rate hikes, are fueling a wave of profit-taking among AI stocks.
Micron’s earnings report is set to drop after market hours on Wednesday, and investors will be closely monitoring it to assess their confidence in AI. The company’s stock has appreciated over 250% this year, but fell 13% on Tuesday amid a tech sell-off.
Meanwhile, late Tuesday saw Cerebras release its first financial results since its public debut in May. The stock of this AI chip maker fell more than 10% in premarket trading, as investors anticipated that its profit margins might lag behind competitors like Nvidia.
On another front, uncertainty continues regarding U.S.-Iran discussions and the outcomes of key topics. President Trump has pledged to keep the Strait of Hormuz free of tolls, but Iran and Oman have started dialogues about implementing fees for ships navigating this vital waterway.
In its after-hours earnings report, FedEx highlighted the impact of a drop in operating profit margins linked to increasing transportation costs and adjustments in trade policy. Viewed as a key indicator for the overall economy, the delivery company saw a decline in its stock price prior to the market opening.
Alphabet will replace Verizon in the Dow Jones Industrial Average on June 29, as part of an effort to better represent burgeoning sectors in the economy. Alphabet’s involvement is expected to enhance the index’s exposure to areas like AI, cloud computing, healthcare technology, and digital advertising. S&P Dow Jones Indices noted that Alphabet’s significance stems from its large market cap and diverse operations.
The decision to replace Verizon, a lower-priced stock, is also due to its limited influence on the index’s performance. Verizon’s stock has risen about 14% since the year started.
In market news, the decline in stocks has led to a drop in liquidity, with gold prices slipping below $4,100 an ounce as investors reduced their gold holdings to offset losses elsewhere. Spot gold decreased by 1.7% in pre-market trading, partly due to rising U.S. Treasuries and an uptick in the dollar’s value.
Gold, typically considered a safe investment, often experiences declines in value during significant market downturns. Concerns are mounting that the tech sector’s struggles may have gone too far, creating additional pressure on gold, which is already burdened by inflation fears pushing the U.S. Federal Reserve toward interest rate increases. The cautious stance from the new Federal Reserve Chairman, Kevin Warsh, has unsettled investors, countering the positive effects of a recent interim peace agreement with Iran.
