US futures fall as Alphabet earnings revive AI spending concerns

What happened

On the morning of October 29, 2026, U.S. equity futures slipped after Alphabet (Google) released its earnings. The S&P 500 futures fell 0.5% and Nasdaq futures dropped 1.4%. Alphabet’s shares slid roughly 10% in after‑hours trading, erasing about $400 billion of market value. The report showed Google Cloud revenue more than doubled year‑over‑year, yet earnings missed expectations and the company posted negative free cash flow, reviving concerns about the scale of AI spending.

In contrast, Microsoft’s shares rose nearly 4% after reporting strong Azure growth and better‑than‑expected cash flow. Smaller software stocks also moved sharply: ServiceNow fell about 19% and Fortinet nearly 25% after disappointing results and guidance. Dow Jones futures, however, were up 0.4%, suggesting a modest rotation toward more defensive sectors.

InvestingLive’s commentary notes that investors are becoming less forgiving of firms that pour billions into AI without clear returns, and that the spotlight now turns to Amazon, which will report later in the day.

Why it matters

Alphabet is the largest U.S. tech company by market cap and a key driver of the Nasdaq. A 10% share decline, wiping out $400 billion, signals that the market is re‑evaluating the cost‑benefit of massive AI investments. While Google Cloud’s revenue surge indicates demand, the negative free cash flow suggests growth is still being funded internally or through debt, potentially pressuring future margins.

The divergent reactions—Microsoft’s gain versus Alphabet’s drop—highlight that the market differentiates companies that can translate AI spend into positive cash flow from those that cannot. This distinction may reshape capital allocation within the tech sector, affecting both large‑cap and mid‑cap stocks.

Market impact

• Juros e títulos: Pressure on tech equities may push some investors toward Treasuries, nudging short‑term yields slightly lower, though the effect is expected to be modest.
• Dollar and FX: A pullback in tech futures could reduce risk appetite, offering a modest boost to the dollar as a safe‑haven asset, but broader macro factors will dominate.
• Equities:
  • Nasdaq: Likely downward bias, reflecting the index’s sensitivity to Alphabet and other software stocks.
  • S&P 500: Light downside pressure, driven by the 0.5% futures decline.
  • Dow Jones: Slight upward bias, indicating rotation into defensive sectors.
• Commodities: No immediate direct impact; however, heightened risk aversion could weigh on risk‑on commodities such as copper.
• Crypto: Potential modest pullback, as digital assets often follow equity market risk sentiment.
• Brazil: The Bovespa may face negative pressure from global risk contagion, especially tech‑related stocks on B3, while the real could see modest depreciation against the dollar.

What to watch

• Amazon’s earnings (AWS growth and AI capex) – crucial to determine whether AI‑spending concerns are company‑specific or sector‑wide.
• Alphabet’s forward guidance – especially regarding free cash flow and AI investment plans for the next quarter.
• Corporate confidence indicators (PMI, surveys) – to gauge whether caution spreads beyond tech.
• Treasury yield movements – to detect capital flows toward lower‑risk assets.

Scenarios

• Base case: Markets retain a cautious stance, with moderate declines in tech futures and a rotation toward defensive stocks; Amazon delivers results showing disciplined AI spending, stabilizing sentiment.
• Risk case: Amazon also reports high AI spend with limited near‑term returns, amplifying fears of an AI‑spending bubble and triggering sharper falls in tech indices, with spill‑over effects on emerging markets, including Brazil.

Original source: ForexLive (InvestingLive). For information only, not investment advice.