Federal Reserve Decision and Market Context

The Federal Reserve concluded its two‑day policy meeting by keeping the target range for the federal funds rate unchanged at 3.5%‑3.75%. The vote was divided, with three of the twelve voting members supporting a rate hike. New Fed Chair Kevin Warsh emphasized that the decision to stand pat does not preclude future action, noting that “there was nothing inertial about our discussions” and that higher longer‑term rates may already be contributing to price moderation. Inflation remains well above the Fed’s 2% target, driven largely by an energy shock linked to the Iran war, although June consumer‑price data came in softer than expected. Oil prices have been volatile this month, with Brent crude up 1.4% to $92.01 a barrel after a roughly 7% gain on Wednesday.

Futures and Index Movements

At 01:55 ET (05:55 GMT), U.S. equity futures were modestly higher: Dow futures rose 27 points (0.1%), S&P 500 futures gained 15 points (0.2%), and Nasdaq 100 futures advanced 133 points (0.5%). In the prior trading session, the major indices fell—Nasdaq 100 down 2.06%, Dow Jones Industrial Average down 2.19%, and the Philadelphia Semiconductor Index (SOX) down 5.33%. The semiconductor index has now declined more than 14% over the past five sessions, and the Nasdaq 100 has entered correction territory (a decline of at least 10% from recent highs).

Microsoft Earnings and AI Spending

Microsoft reported fiscal‑quarter results for the quarter ended June. Revenue surged 18% year‑over‑year to $90 billion, while net income jumped 31% to $35.8 billion, both beating market expectations. CEO Satya Nadella highlighted that Azure, Microsoft’s AI‑enhanced cloud platform, generated over $100 billion in revenue for the fiscal year, marking the first time the segment crossed that threshold. Capital expenditures rose 69.4% year‑over‑year to $41 billion for the quarter, bringing the annual capex outlook to $145.3 billion. Despite limited guidance on future AI spending, investors reacted positively, and Microsoft shares rose more than 7% in extended‑hours trading.

Meta Platforms Results and Outlook

Meta Platforms delivered record second‑quarter revenue of $60.8 billion, but profit fell 14% to $18.3 billion and free cash flow slipped below $1 billion. The stock dropped over 7% in after‑hours trading. The company raised its capital‑expenditure guidance to a range of $130 billion to $145 billion for the year, up from a prior top end of $125 billion, and reaffirmed the upper bound of $145 billion. Meta also warned that ongoing legal proceedings concerning the impact of its social media platforms on young users could result in a material loss. The earnings call was expected to address concerns about the sustainability of its AI‑related spending and monetisation strategy.

Qualcomm Guidance and Pricing Strategy

Qualcomm’s shares fell in extended‑hours trading after the company issued weaker guidance for the current quarter. Adjusted earnings per share for the third quarter were $2.21, just shy of FactSet estimates, while revenue declined 4% to $9.95 billion, though it still beat expectations. CEO Cristiano Amon indicated the firm will raise product prices to offset rising memory and manufacturing costs and noted supply‑chain constraints linked to heightened data‑center demand.

Other Corporate Updates

  • Starbucks Corp posted third‑quarter results that beat consensus estimates, driven by accelerating traffic growth in its core North American market and operational improvements under its turnaround plan; the stock gained 4% in after‑hours trading.
  • Chipotle Mexican Grill Inc reported a quarterly top‑ and bottom‑line beat, citing new restaurant openings and progress in its branding strategy, and subsequently raised its full‑year comparable‑sales guidance; shares rose in after‑hours trading.

Market Commentary

Thomas Ryan, Senior North America Economist at Capital Economics, described Chair Warsh’s post‑meeting remarks as “vague and arguably counter‑productive,” adding that they make forecasting the Fed’s next move more challenging than before.

Sectoral Themes

The article underscores ongoing concerns about the sustainability of massive AI infrastructure spending, especially in chips and data centres, and notes emerging competition from Chinese firms that have dampened sentiment in semiconductor stocks.