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US tech stocks dropped sharply on Thursday after Microsoft reported a surge in data centre spending, reigniting investor nerves about the vast expenditure by Silicon Valley giants.
The Nasdaq Composite was down 2.2 per cent in morning trading, and the broader S&P 500 lost 1.2 per cent.
Microsoft fell 11 per cent, dragging the market lower, after the company reported a 66 per cent year-on-year surge in its data centre spending, taking its capital expenditure to $37.5bn in the three months to December.
The software group also reported slower than expected cloud growth, although adjusted net income and revenue both exceeded analysts’ expectations.
Investors expressed nervousness about Microsoft’s over-reliance on OpenAI, with Wednesday’s results revealing that 45 per cent of Microsoft’s $625bn book of future cloud contracts came from the ChatGPT maker.
“The market is watching the exposure of Microsoft on OpenAI,” said Manish Kabra, head of US equity strategy at Société Générale.
The FT reported on Thursday that OpenAI was in talks to raise close to $40bn in its upcoming funding round from Nvidia, Microsoft and Amazon — three of its largest infrastructure providers — reigniting fears about circular financing in the AI sector.
Oracle, which has signed a $40bn data-centre deal with OpenAI, fell 6.3 per cent on Thursday morning while Nvidia slid 1.6 per cent.
Better results from Meta on Wednesday evening sent its share price 8.2 per cent higher but failed to reassure traders about the broader sector.
The price of oil jumped on Thursday as traders reacted to US President Donald Trump’s escalating threats against Iran.
www.ft.com
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