July 24 (Reuters) - Wall Street futures fell on Wednesday, with those tracking the tech-heavy Nasdaq recording the steepest losses after weak quarterly earnings from Tesla and Alphabet, as investors questioned the dominance of Big Tech and euphoria around AI.
Tesla (TSLA.O), slumped 8% in premarket trading and looked set to lose roughly $60 billion in market value, if losses hold, after the EV maker reported its lowest profit margin in over five years and missed expectations for second-quarter earnings.
Google parent Alphabet (GOOGL.O), , too, shed 3.1% despite beating expectations for second-quarter revenue and profit, as investors focused on a slowdown in advertising growth and the company flagged high capital expenses for the year.
Alphabet's losses underscore the high earnings bar for the so-called Magnificent Seven, the set of megacap tech stocks that have notched double- to triple-digit percentage gains so far in 2024, riding on optimism around AI adoption and an early start to Federal Reserve rate cuts.
"The first view on Big Tech earnings wasn't inspiring," said Ipek Ozkardeskaya, senior analyst at Swissquote Bank.
"Two of the Magnificent Seven stocks failed to create euphoria when they reported their Q2 results. The less-than-ideal set of earnings comes at a time when investors are questioning whether the AI rally has gotten ahead of itself."
Results from the tech giants, which have driven broader indexes to all-time highs over the first half of the year, will be key to determine if the Wall Street rally has steam to spare, even as market participants have grown wary of the valuation of these companies and started shifting to underperforming sectors.
Other megacaps such as Microsoft (MSFT.O), , Amazon.com (AMZN.O), , Meta Platforms (META.O), and Nvidia (NVDA.O), were down between 0.3% and 2.2%.
Wall Street's main indexes had closed lower on Tuesday, although the Russell 2000 (.RUT), ended 1% higher. Futures tracking the small-cap index fell 0.3% on Wednesday.
Later in the day, investors will parse the S&P Global's flash PMI and new home sales numbers. But the key economic release of the week is Friday's personal consumption expenditures data, which can corroborate if market bets on the monetary policy path are headed in the right direction.
Traders have priced in a nearly 92% chance the U.S. Federal Reserve will cut interest rates by 25 basis points by its September meeting and expect two rate cuts this year, according to LSEG data.
At 6:54 a.m. ET, Dow e-minis were down 170 points, or 0.42%, S&P 500 e-minis were down 38.75 points, or 0.69%, and Nasdaq 100 e-minis were down 207 points, or 1.04%.
In other earnings, AT&T (T.N), gained 3.1% after beating forecasts for wireless subscriber additions in the second quarter, as the telecom operator's higher-tier unlimited plans attracted customers.
Solar inverter maker Enphase Energy (ENPH.O), jumped 5.7% after beating estimates for second-quarter operating profit, while Texas Instruments (TXN.O), rose 2.8% after a second-quarter profit beat.
Visa (V.N), dropped 3.4% after its third-quarter revenue growth fell short of expectations, a rare miss for the world's largest payments processor, while Thermo Fisher Scientific (TMO.N), dropped 3% after results.
Meanwhile, shares of Rivian Automotive (RIVN.O), fell 3.3% as the EV maker will go on trial over allegations it encouraged its employees who defected from Tesla to steal trade secrets.
Reporting by Ankika Biswas and Lisa Mattackal in Bengaluru; Editing by Varun H K and Pooja Desai
