Nasdaq 100 Futures Fall 1.8% Before the Open After Meta and Tesla Earnings

Wall Street's AI rebound is wobbling before the opening bell. Nasdaq-100 futures were down 1.8% early today, Thursday, Oct. 22. S&P 500 futures were off 1.02% and Dow futures down 0.66%. Regular trading has not started; the U.S. open is at 9:30 a.m. ET.

The drop threatens to wipe out much of the Nasdaq 100's 2.2% gain this week. Investors are moving into Treasuries, according to Bloomberg's market reporting.

Meta up, Tesla down

Meta Platforms reported third-quarter revenue above estimates on Wednesday and gave strong guidance for the current quarter. Its shares were up 0.74% in pre-market trading. Bloomberg reports the company also raised its capital spending plans. Dan Ives of Yorkville Ives said Meta narrowed its range for full-year data center spending and called the cost "better controlled than feared."

Tesla also reported third-quarter revenue and earnings above expectations. Its shares were still down 4.59% in pre-market trading, and Bloomberg ties the drop to the company cutting back on spending.

Ives read the Meta numbers as a sign that the AI bet is working. "The quarter showed the AI investment paying off in the core," he said.

The tech tape had been strong going into the print. The Nasdaq Composite closed up 1% on Wednesday, and the S&P 500 posted a three-day winning streak. Blowout quarterly results from SpaceX lifted Micron and Advanced Micro Devices. Super Micro Computer raised its fiscal first-quarter revenue outlook.

Oil climbs, Asia and Europe slide

Markets fell globally. Oil rose, with WTI near $99.60 and Brent near $108.75 on one market data feed. Europe's Stoxx 600 was down 1%. France's CAC 40 fell 1.34%. Japan's Nikkei 225 dropped 0.73% and Hong Kong's Hang Seng fell more than 2%.

Hermès was the biggest drag on the Stoxx 600, last down nearly 7%. The company said third-quarter revenue rose 4.3% to 4.1 billion euros ($4.6 billion), but sales of ready-to-wear, accessories and watches fell, and Chinese demand weakened.

A week ago: the AI selloff

This week's rebound followed a brutal stretch. A hotter-than-expected consumer price report on Wednesday, Oct. 14, revived talk of further Federal Reserve rate increases. The Nasdaq had its worst day since July.

The next day, Oct. 15, September producer prices came in well above consensus. The index rose 1.3% on the month, a 6.3% annual pace, and core producer inflation rose 0.7%. Treasury yields fell anyway as money fled tech. The 10-year yield slid below 5.1%.

Asia took the worst of it that day. South Korea's Kospi closed about 7.5% lower, with Samsung Electronics down 9.5% and SK Hynix down 11%. Japan's SoftBank fell 9.3% and the Nikkei dropped 4.9%. ASML fell more than 6% in Europe.

CoreWeave had already dropped more than 15% the previous session as investors pressured its bonds. The company has come under scrutiny over heavy borrowing and capital spending.

Taiwan Semiconductor Manufacturing Co. reported a record quarterly profit and better-than-expected guidance. It also struck a cautious tone on 2027 because of macroeconomic uncertainty. Shares did not respond.

The debt question

Joachim Klement, a strategist at Panmure Liberum, said that "we are seeing some blocks being pulled out of the Jenga Tower that is the AI capex boom." He added: "Higher debt costs makes it extremely difficult for neoclouds and hyperscalers to finance further data centers now that their free cash flows have evaporated."

Others argue demand is intact. Hendi Susanto, a portfolio manager at Gabelli Funds, said "the biggest challenge in AI investing right now isn't the fundamentals. It is the expectations that are fragile." He said the infrastructure buildout will continue into the new year and that chip suppliers are expanding capacity because they see orders coming.

Adam Turnquist, chief cross-asset strategist at LPL Financial, said enthusiasm for the broader AI investment cycle "remains intact." He said Korea's concentrated exposure to memory chips makes it more vulnerable to competitive threats and shifts in the memory cycle.

The pullback is a dent in a big run. The PHLX Semiconductor Index was still up 61% for the year as of Oct. 15, and the Kospi was up almost 30%.

What to watch today

Procter & Gamble, Lockheed Martin, Valero Energy and Honeywell report results today. Weekly jobless claims are due this morning.

The open will show whether the Nasdaq holds any of its 2.2% weekly gain, or whether Meta's beat and Tesla's drop become another round of rotation out of AI stocks.