U.S. stock futures fell on Wednesday, weighed down by weak performance in chip stocks, as investors remained cautious ahead of the first batch of earnings reports from major technology companies, which could determine whether the AI-led rally on Wall Street can continue, according to Reuters.
After months of gains that pushed major indexes up from their March lows, momentum began to lose strength as volatility increased in shares of major semiconductor companies, dampening investors' appetite for risk.
Investors are awaiting the earnings reports of Alphabet and Tesla, the first G7 companies to announce their results after the close of trading today, looking for new indications of the success of their massive investments in artificial intelligence.
Alphabet is under special scrutiny after postponing the launch of one of its key artificial intelligence models, raising concerns about the pace of the company's progress in this area.
Ipek Ozkardeskaya, senior analyst at Swissquote Bank, said that if the major technology companies, which have been pouring their free cash into chip companies without yet demonstrating a sufficient return, show signs of slowing down spending, the semiconductor sector could be hit by a new sell-off.
Texas Instruments shares also fell 1.7% in pre-market trading, ahead of the release of its earnings report, affected by the weakness that is dominating chip stocks.
Markets are bracing for a potentially volatile week, amid a flurry of corporate earnings reports and ongoing geopolitical risks.
Developments in the Middle East continue to dominate investor attention, with threats from the Iranian-backed Houthis to maritime traffic and the widening conflict affecting two of the world's most important energy transit routes.
US Secretary of State Marco Rubio said that Washington remains ready to negotiate to end the crisis with Iran, but stressed that Tehran is not serious about negotiations.
Oil prices have stabilized near their highest levels in six weeks, further complicating central banks' decisions on monetary policy.
According to a Reuters poll of economists, the Federal Reserve is expected to hold interest rates steady until the end of 2026, despite the continued high risk of a rate hike.
The Chicago Board of Trade's Fidwatch tool also showed that markets are pricing in a greater than 70% probability of interest rates remaining unchanged at next week's meeting.
Dow Jones futures fell 45 points, or 0.09%, Standard & Poor's 500 futures dropped 22 points, or 0.29%, while Nasdaq 100 futures declined 208.75 points, or 0.71%.
In pre-market trading, Supermicrocomputer shares jumped 16.8% after the AI server maker announced it had received more than $60 billion in new orders during the fourth quarter, with its gross profit margin expected to exceed its previous estimates.
