Nasdaq 100: AI Concerns Resurface

Disappointing results from a couple of major global technology names have put the AI trade back under scrutiny, with Nasdaq 100 futures falling around 1% after fading the post-FOMC uplift seen overnight. Concerns that the trillions of dollars being committed to artificial intelligence may not generate sufficient returns were reignited by Alphabet's (GOOGL) results. The Google parent pointed to signs that its AI search products are beginning to weigh on its core advertising business, while both earnings and revenue fell short of expectations. The combination has raised fresh questions over whether the scale of Alphabet’s AI investment can ultimately be justified by the returns it generates.

The picture is far from uniformly negative, however. While the Nasdaq 100 futures might be down because of Alphabet, Microsoft (MSFT) delivered a much stronger set of numbers, with robust Azure growth, resilient AI demand and an upbeat cloud outlook. Shares were around 3.5% higher pre-market, providing some offset to the weakness elsewhere in the sector.

Tech underperforms

The broader equity picture is mixed, but technology-heavy indices are clearly underperforming. Alphabet shares were down around 10% pre-market, while the weakness has spread into other parts of the AI and semiconductor complex.

Samsung Electronics (SSNLF) fell around 4% despite reporting a 15-fold year-on-year increase in chip profits, helped by strong demand for AI-related memory. Investors instead focused on the lack of new shareholder-return measures, while the company’s plan to increase FY26 capital expenditure by more than 60% also raised questions about the amount of investment required to keep up with AI demand.

That makes the earnings backdrop increasingly two-sided. Strong demand for AI infrastructure remains evident, but investors are becoming less willing to reward spending simply because it is labelled as AI-related. The key question is increasingly whether these investments can translate into sustainable earnings and cash flows.

Here is a list of today’s market movers.

Europe has also delivered one of its busiest earnings sessions of the season, with results offering a mixed picture rather than providing a clear directional signal for the broader market.

GDP beats as core PCE comes in line

With the initial dovish reaction to Wednesday’s FOMC decision already fading, attention is turning back towards the economic data. Today, US GDP and core PCE inflation were the main highlights.

September core PCE printed a 0.3% month-on-month increase, reinforcing the picture of relatively sticky inflation. Third-quarter GDP, meanwhile, showed annualised growth of 3.4%, better than 3.2% expected.

A combination of firm growth and sticky inflation is making it harder for the Federal Reserve not to hike in December. Even if oil prices ease from current levels, the broader inflation and growth backdrop remains firm enough to keep the Fed on a relatively hawkish path.

Nasdaq 100 technical analysis

The Nasdaq 100 futures fell back from around the 30,000 level overnight after failing to hold above the 21-day exponential moving average.

The index has increasingly been looking bearish following the break of this bullish trend line a few weeks ago. Unless that trend line is reclaimed, I think we need to proceed with a degree of caution as the market continues to digest the latest earnings and decides whether to make a deeper move lower, or consolidate before the next move.

For now, consolidation remains the name of the game. It remains very much a level-to-level market.

The most recent significant low, hit in mid-September, comes in at 28,816. That is an important level and, for me, the line in the sand. If it breaks, we would have a clear lower low in place, strengthening the bearish technical picture.

In the short term, support comes in at 29,500. Below that, we have 29,200 as the next area of support.

In terms of resistance, 30,000 remains a key psychologically important level. Above that, the backside of the broken trend line comes in around 30,340.

A sustained move above that area would start to improve the technical picture and could open the door towards the previous highs.

For now, though, the bias remains cautious while the Nasdaq 100 trades below the broken trend line.