Nasdaq Futures Down 2% as Tech Selloff Spreads to Asia and Europe After Alphabet's 13% Drop

Alphabet's earnings sent its shares down 13% on Thursday, and the AI-spending selloff has now gone global. Nasdaq futures fell 2% and S&P 500 futures fell 0.9% ahead of Wall Street's opening, according to a Financial Times report cited by Hedgeweek. Futures are indications, not final prices.

Asia and Europe follow Wall Street lower

Japan's Nikkei 225 fell 2.1%. South Korea's Kospi fell 3.5%.

SoftBank dropped 6%, extending its decline from its June peak to 48%. Memory chipmakers SK Hynix and Samsung Electronics lost 7.1% and 3%. In early European trading, chip-equipment maker ASML fell 4.9%.

On the U.S. side, Amazon shares were down 6.6% in pre-market trading after weaker-than-expected sales. Intel tumbled 26% following a disappointing outlook. Pre-market moves can reverse once regular trading begins.

The numbers behind the nerves

Alphabet's drop erased approximately $500 billion in market value, per the FT. Alphabet, Amazon and Meta together have lost nearly $900 billion in market value, the FT reported.

The spending is the issue. Alphabet's capital-expenditure guidance runs as high as $205 billion. Amazon's is around $220 billion.

The New York Times reported Oct. 29 that Amazon, Microsoft, Google and Meta plan to spend more than $720 billion this year on data centers and other capital investments. That is about three times what the same four spent two years earlier.

The cash-flow picture has changed with it. Both Alphabet and Meta burned cash in the September quarter, and Microsoft completed a $25 billion debt sale, per Reuters wire reporting. Meta fell 7% the week before after saying it was using significant cash reserves and issuing new stock.

That is a different profile from the debt-light companies these firms were known as. Analysts cited by the FT pointed to deteriorating cash flows, rising capital expenditure and whether future AI revenue can justify the scale of the investment.

Alphabet faces a second question. Investors also questioned the impact of AI-powered search on its advertising business, the FT reported.

Microsoft is the counterexample

Microsoft is the one large spender that held up. It beat Wall Street expectations on two counts, which The Week describes as clear proof that its AI investments are translating into revenue and profit.

Microsoft also priced a $25 billion debt sale on Thursday, its first major entry into the U.S. investment-grade bond market since 2017. The offering attracted a peak of $115 billion in orders, per The Week.

That is the strongest argument against the selloff: the spending is not the problem when the revenue shows up. The market is sorting companies by whether it does.

Of the Magnificent Seven, only Apple, Microsoft and Nvidia remain positive for the year after Thursday's declines, per the FT.

Side effects outside the big four

The AI buildout has also pulled on the broader hardware market. The Week reports that heavy data-center spending drove up prices for basic consumer RAM and SSDs and contributed to a slump in demand for PCs and smartphones. It also says Intel's PC business took a major hit from the chip shortage.

A class-action lawsuit against the major memory manufacturers alleges they artificially restricted standard chip supply to prioritize high-bandwidth memory for AI. Those are allegations in a lawsuit.

The pullback has also reached private AI. Anthropic's year-end valuation is being tracked in prediction markets, and observers are watching for any funding round or change in its partnerships with Amazon and Google. No announcement has been reported.

What to watch at the open

The first test is whether the futures declines hold when U.S. trading begins. Amazon and Intel carry the biggest pre-market moves, while Alphabet remains in focus after Thursday's 13% drop.

The larger test comes in future quarters. Investors are waiting to see whether more than $720 billion in annual spending produces the returns Microsoft's results suggest are possible.