U.S. stock futures edged higher on Thursday, with investors closely watching earnings reports from major technology players like Microsoft (NASDAQ:MSFT) and Meta Platforms (NASDAQ:META), alongside updates on monetary policy from the Federal Reserve. Despite global uncertainty surrounding the rise of a cut-price Chinese AI model, executives from these tech giants remain committed to their heavy investments in artificial intelligence (AI) to stay competitive. Meanwhile, Tesla (NASDAQ:TSLA) seeks to overcome declining demand by rolling out a new, more affordable electric vehicle, adding a fresh layer of excitement to its business outlook.
1. Futures Point to a Modest Recovery
Stock futures in the U.S. experienced a positive uptick on Thursday, fueled by the release of earnings from prominent tech companies and the Federal Reserve’s cautious approach to monetary policy.
By 05:42 AM EST, key futures indices displayed notable gains: the Dow Jones futures rose by 190 points, or 0.42%, the S&P 500 futures climbed 23.50 points, or 0.39%, and the Nasdaq 100 futures gained 110 points, or 0.51%. The previous session had seen Wall Street retreat, following the Fed’s decision to pause a series of expected interest rate cuts. Investors were left contemplating the future of monetary policy, as the Fed signaled a “wait-and-see” approach amid uncertain economic data.
While some sectors on Wall Street showed resilience, tech stocks faced pressure. Nvidia (NASDAQ:NVDA), a leader in the AI space, saw its shares fall by 4.1%, partly due to concerns about rising competition from Chinese startups like DeepSeek, which introduced a low-cost AI model. The worries surrounding AI-related investments contributed to market volatility but also set the stage for important discussions on the future of AI spending.
2. Microsoft’s and Meta’s CEO Defense of AI Spending
Amid the ongoing concerns about the viability of massive AI investments, Microsoft and Meta executives were quick to defend their spending strategies during earnings calls. The emergence of DeepSeek, a Chinese AI startup offering a free model built for just $6 million, has raised eyebrows among analysts who question whether American tech companies need to continue pouring billions into AI infrastructure.
Microsoft’s CEO, Satya Nadella, downplayed the rising costs of AI, asserting that technological advancements are leading to more affordable AI solutions over time. He emphasized that their AI investments are crucial to staying ahead of competitors and maintaining leadership in the market. Meta’s CEO, Mark Zuckerberg, took a similar stance, labeling capital expenditures in AI as a strategic advantage that would pay off in the long run.
However, Microsoft’s quarterly outlook, particularly for its Azure cloud computing division, fell short of expectations, leading to a drop in stock price after hours. Conversely, Meta’s stock surged, buoyed by better-than-expected revenue in Q4, although they cautioned that sales might slow down in the current quarter.
3. Tesla’s Move to Slash Costs and Introduce a Cheaper EV
Tesla is doubling down on cost-cutting measures as it seeks to reignite demand for its electric vehicles in a competitive market. The company announced plans to launch a new, low-cost EV model in 2025, in an effort to boost sales after experiencing a dip in deliveries last year.
CEO Elon Musk revealed that Tesla had successfully reduced its average vehicle construction cost to an all-time low, driven by falling raw material prices. While the company has introduced less expensive financing options to support demand, analysts expressed concerns that these measures could negatively impact Tesla’s margins. Despite these challenges, Tesla remains optimistic, with Musk eyeing a 20%-30% growth in vehicle sales for the year.
Additionally, Musk highlighted that Tesla’s autonomous driving and AI advancements are expected to be key drivers of future business. The company is set to begin testing a paid autonomous vehicle service by June, adding another layer to its ambitious plans for innovation and growth.
4. Apple’s Upcoming Earnings Report Amid Market Competition
Apple (NASDAQ:AAPL) is set to report its earnings after the bell on Thursday, and expectations are muted, with analysts predicting modest growth in revenue. Apple is facing growing competition in its crucial Chinese market, which could have dampened sales during the holiday period.
The company has also been gradually rolling out AI enhancements to its products, with mixed reviews for its Siri voice assistant and Apple Intelligence features. Initial feedback on its AI tools has been lukewarm, and analysts have speculated that they may not be the primary driver of future iPhone sales.
Despite these challenges, Apple’s comparatively smaller investment in AI—especially when compared to rivals like Microsoft and Meta—has positioned the company as less vulnerable to the competition posed by DeepSeek’s low-cost AI model. Some analysts argue that Apple’s model, relying on third-party data centers for its AI infrastructure, is a more sustainable approach in the long term.
5. Federal Reserve Keeps Rates Steady as Inflation Concerns Linger
On Wednesday, the Federal Reserve announced it would maintain interest rates at 4.25%-4.5%, signaling that it is in no rush to make further rate cuts. The decision comes amid solid U.S. economic data, but lingering concerns over inflation and potential pressure from political factors, such as new policy decisions under the Trump administration, have left the Fed cautious about future moves.
Chair Jerome Powell stated that the central bank is comfortable with its current policy stance, noting that the job market remains stable and inflation is showing signs of improvement. However, Powell emphasized that the Fed would continue to monitor economic developments closely, especially the impact of fiscal policies, which could drive inflation higher.
Meanwhile, the European Central Bank (ECB) is expected to cut rates on Thursday in an effort to stimulate economic activity in the Eurozone, signaling a different approach to managing post-pandemic economic challenges.
