Investing.com - U.S. stock futures climb following fresh quarterly reports from a slew of Big Tech companies, including Microsoft (NASDAQ:MSFT) and Meta Platforms (NASDAQ:META). Executives at these firms back a spike in artificial intelligence spending despite worries over the strategy in the wake of the emergence of a cut-price Chinese AI model earlier this week. Tesla (NASDAQ:TSLA) aims to reduce costs and roll out a new, cheaper electric vehicle this year to combat flagging demand, while the Fed opts to take a wait-and-see approach to future policy moves.
1. Futures higher
U.S. stock futures ticked higher on Thursday, as investors assessed a raft of earnings from mega-cap tech companies and poured over monetary policy comments from the Federal Reserve.
By 03:55 ET (08:55 GMT), the Dow futures contract had gained 162 points or 0.4%, S&P 500 futures had risen by 31 points or 0.5%, and Nasdaq 100 futures had advanced by 168 points or 0.8%.
The main averages on Wall Street all slipped in the prior session following the Fed's widely-anticipated decision to press pause on a series of borrowing cost cuts. Policymakers also signaled that they will take a wait-and-see attitude to any potential reductions in the future, pushing up US government bond yields and denting equities (more below).
Stocks were also pulled lower by technology shares, including artificial intelligence-darling Nvidia (NASDAQ:NVDA), which dropped by 4.1%. The slide came two days after a global sell-off sparked by the emergence of a low-cost AI model from Chinese start-up DeepSeek that raised questions over major tech groups' massive AI spending plans.
2. Microsoft, Meta CEOs on DeepSeek
Despite these concerns, executives at software giant Microsoft and Facebook-owner Meta Platforms moved to defend the spending as a way to maintain competitiveness in the race to monetize AI.
The rise in popularity of DeepSeek's free AI model was a key issue for analysts as they parsed through quarterly returns from these companies. DeepSeek has said it built the model using less-advanced chips and for only around $6 million, a claim that has been sharply questioned but has still fueled worries around the necessity of the billions of dollars in AI investments being pursued by American tech giants.
Microsoft CEO Satya Nadella told analysts in a post-earnings call that AI costs are decreasing, while Meta boss Mark Zuckerberg argued that shelling out heavily on capital expenditures will prove to be a "strategic advantage" over time.
Shares in Microsoft fell in extended hours trading after the company's third-quarter outlook for its crucial Azure cloud computing unit disappointed expectations.
Meta's stock price, on the other hand, rose after-hours on better-than-estimated fourth-quarter revenue, although it flagged that current-quarter sales may not meet expectations.
3. Tesla pushes to slash costs, roll out cheaper EV model
Electric vehicle giant Tesla noted that it was driving to slash costs and roll out a cheaper EV model, giving lift to its shares in extended hours dealmaking.
Tesla, which logged a decline in deliveries last year, said it is moving to launch its new low-cost EV in the first half of 2025 in a bid to help boost demand. CEO Elon Musk has previously projected that vehicle sales would grow by 20% to 30% this year, although the company did not reiterate the estimate in its latest earnings.
Tesla added that the average cost for constructing its cars hit an all-time low in the fourth quarter thanks in part to falling raw material expenses.
Quarterly profit margin from vehicle sales, stripping out regulatory credits, came in at 13.59%, according to calculations from Reuters. Wall Street analysts had seen the figure at 16.2%, Reuters added, citing Visible Alpha data. Tesla has offered less expensive financing to support demand, but analysts have flagged that this could eat into margins.
Elsewhere, Musk said Tesla would begin testing a paid autonomous vehicle service in June. He has targeted Tesla's driver assistance software, as well as AI, as key sources of support for the business in the future.
4. Apple to report
Apple (NASDAQ:AAPL) is due to report after the bell on Thursday, with the iPhone manufacturer tipped to unveil tepid quarterly revenue growth.
The California tech group has faced intensifying competition in its major Chinese market, possibly denting sales during the holiday shopping period.
It has also been slowly introducing AI-enhanced features on its handsets. An improved version of its Siri voice assistant is not expected to be available until later this year in some regions, while initial reviews for its Apple Intelligence offering have received "mixed-to-poor reviews", analysts at Vital Knowledge said.
The analysts also flagged in a note to clients that the lukewarm reception to Apple Intelligence may suggest that the product "won't be a huge driver of iPhone sales".
However, Apple is still less exposed to the emergence of DeepSeek's AI model than its other Big Tech peers who have invested heavily in AI, according to analysts at Baird.
In a note to clients, the analysts said the firm, as a "leading" manufacturer of consumer-facing products, is "well-positioned" to benefit from so-called generative AI "without spending tens of billions of dollars on large language models or infrastructure".
Apple said fiscal fourth-quarter payments for property and equipment -- a gauge of capital expenditures -- rose by $2.91 billion to $9.45 billion. The amount was relatively more modest than the plans put forward by rivals like Microsoft and Meta Platforms, partly because Apple uses third-party data centers for some of its AI work.
5. Fed leaves rates steady; ECB decision ahead
The Fed held interest rates steady at a range of 4.25% to 4.5% on Wednesday, while Chair Jerome Powell said officials were in no rush to cut borrowing costs again.
Underpinned by a recent set of solid U.S. economic data and lingering uncertainties surrounding the wider outlook, officials chose to place monetary policy on a holding pattern.
However, decisions on tariffs, taxes, and immigration by the new Trump administration could factor once again into the Fed's plans. Some economists have predicted the moves could place renewed upward pressure on inflation, which remains above the Fed's stated 2% target level.
Speaking in a press conference, Powell said he believed the Fed had a "very well-calibrated" policy stance supported by a "broadly stable" employment picture and "more positive" inflation readings. As such, the Fed sees no cause to adjust rates again until data shows risks to the job market or a fresh drop in inflation.
Powell added that the Fed's calls were not motivated by politics -- a comment that came after Trump criticized the central bank and urged policymakers to cut rates.
Elsewhere, the European Central Bank is expected to slash rates on Thursday as policymakers look to revive sluggish economic activity in the Eurozone currency area. The ECB previously lowered rates four times in 2024, noting that a steep climb in inflation in recent years was almost finished.
