S&P and Nasdaq futures indicate a downward trajectory following a decline in shares during the prior session, driven by concerns surrounding the artificial intelligence sector and the prospect of sustained elevated interest rates. Media reports indicate that Anthropic has disclosed a rise in third-quarter revenue to institutional investors, although the pace of top-line growth has moderated at the AI bellwether. However, demand for AI continues to be robust, as TSMC, the largest contract chipmaker globally, has reported a new record high in profit.
Dow futures remained predominantly below the flatline on Thursday. By 02:54, the Dow futures contract had inched up by 27 points, or 0.1%, S&P 500 futures had dropped by 38 points, or 0.5%, and Nasdaq 100 futures had fallen by 407 points, or 1.4%. The primary indices on Wall Street experienced a decline in the previous session. September consumer price growth exceeded expectations, leading some investors to raise their expectations for a potential Federal Reserve rate hike later this month. This led to a decline in stocks and a significant increase in U.S. Treasury yields, although the bond selloff eased later in the session. Analysts indicated that the modest recovery in Treasuries was associated with traders reallocating from riskier AI names to the perceived safety of U.S. debt. Concerns have emerged that rising interest rates may affect a surge of debt-driven expenditure supporting an AI sector that is already facing heightened competition both at home and internationally. Shares of AI cloud group CoreWeave experienced a significant decline, dropping by over 15%, while certain bonds fell to unprecedented lows in secondary markets. At the conclusion of the session, both the benchmark S&P 500 and the tech-heavy Nasdaq Composite experienced their most significant one-day declines since July.
Despite the significant decline in AI stocks, the prominent AI frontier lab Anthropic was striving to sustain the considerable enthusiasm surrounding this emerging technology. Reports indicate that during a meeting with institutional investors on Wednesday, the company communicated that its third-quarter revenue increased by 45% to $16.8 billion. Anthropic, whose popular Claude chatbot has positioned the company as a leading entity within the broader AI sector alongside competitor OpenAI, previously reported revenue of $11.6 billion in the second quarter and under $5 billion in the first quarter, as noted. In a note, analysts at Vital Knowledge said that while such solid quarter-on-quarter growth would be celebrated “in any normal world,” the rate of change is cooling, possibly raising a red flag for investors. “[I]n the land of AI, where investors are used to parabolic figures, a slowdown in growth undercuts sentiment,” the analysts wrote. The numbers are being closely scrutinised largely because Anthropic plans to raise as much as $100 billion with a valuation of roughly $2 trillion in a potential blockbuster initial public offering, according to the WSJ. When precisely the IPO will occur remains uncertain, yet Anthropic is expected to disclose additional information regarding its operations in the forthcoming IPO documentation, according to the WSJ.
Despite concerns regarding the future of AI companies, the demand for the technology and its supporting infrastructure seems to have stayed strong. The latest example comes from Taiwan Semiconductor Manufacturing Co., which recorded a fresh record profit of 763.06 billion New Taiwan dollars in the three months to September 30, reflecting a 69% increase from the previous year. LSEG estimates indicated the figure at NT$746.3 billion. Revenue increased by 50% to NT$1.49 trillion. Gross margin stood at 66.4%, operating margin at 58.7%, and net profit margin at 51.1%, according to TSMC. The company indicated that it had evaluated the possibility of establishing additional facilities in the U.S., potentially in Texas, as it strives to enhance capacity to satisfy rising demand.
On the economic calendar, a monthly reading of the U.S. producer price index may provide further insight into the current inflationary trends within the world’s largest economy. In September, producer prices for final demand are observed to have increased by 0.6% on a month-on-month basis, up from 0.4% in the preceding month. In the twelve months leading up to September, the Producer Price Index is projected to register at 5.3%, a slight decrease from the previous figure of 5.4%. On Wednesday, a distinct measure of consumer price growth from the Labour Department showed a greater acceleration than expected, underscoring the impact of an energy shock associated with the Iran war. This week’s inflation data is critical, as the figures will be the most up-to-date Fed policymakers will have before they convene for a two-day meeting on October 27-28. In addition to inflation, investors will have the opportunity to analyse indicators of retail sales and initial jobless claims.
Oil prices declined as traders evaluated supply risks arising from assaults on tankers in proximity to the Strait of Hormuz, alongside a report indicating that the U.S. is contemplating the relaxation of sanctions on vessels to mitigate petroleum shipping expenses. Brent oil futures decreased by 1.9%, settling at $104.02 per barrel by 03:35, whereas West Texas Intermediate crude futures declined by 1.1%, reaching $94.04 per barrel. A container ship and a dry bulk vessel both sank near Hormuz within the last 24 hours as a result of strikes from distinct projectiles, according to maritime officials. Recent days have seen a rise in strikes on vessels within this vital chokepoint, heightening apprehensions regarding the persistent disruptions to oil flows in the Gulf. Fighting between Saudi Arabia and Houthi militants in Yemen has raised concerns that the conflict in the Middle East may be escalating, posing a threat to traffic through other critical shipping routes, particularly the Bab el-Mandeb Strait, which links the Red Sea to the Gulf of Aden. With energy prices on the upswing, U.S. President Donald Trump has been considering the possibility of relaxing sanctions on what are referred to as shadow fleet vessels that carry oil and derivatives from countries under sanctions, including Russia, Iran, and Venezuela.
