A trader works on the floor at the New York Stock Exchange (NYSE) in New York City, U.S., October 29, 2025. REUTERS/Brendan McDermid

By Pranav Kashyap and Nikhil Sharma

(Reuters) - The S&P 500 and the Nasdaq lost ground on Thursday as Meta Platforms and Microsoft slid on concerns of surging AI spending, unnerving investors already worried about the pace of monetary policy easing from the U.S. Federal Reserve.

Meta plunged 12.1%, on track for its biggest percentage drop in three years, after the Instagram-parent forecast "notably larger" capital expenses next year thanks to investments in artificial intelligence.

Microsoft dipped 2.3% after the tech giant reported record capital expenditure of nearly $35 billion for its fiscal first quarter and warned spending would rise this year.

"We're seeing a limitation in the context of CapEx spend and AI monetization," said Timothy Chubb, chief investment officer at Girard.

"It was a fairly low bar this quarter and it's going to be extremely bifurcated. We're interested in getting a better read on the consumer after the next Mag 7 reports."

In contrast, Google-parent Alphabet jumped 5.5% as steady growth in the advertising business and cloud computing powered better-than-expected results.

Attention now turns to results from fellow "Magnificent Seven" members Apple and Amazon, scheduled to report results after market close.

U.S. stocks touched record highs on Wednesday after AI chip designer Nvidia became the first publicly listed company to breach $5 trillion in market capitalization.

Optimism around AI has been a key driver of the bull run in U.S. stocks this year, with the top technology companies collectively accounting for 35% of the weight of the S&P 500.

At 10:33 a.m. the Dow Jones Industrial Average rose 262.26 points, or 0.56%, to 47,894.26, the S&P 500 lost 26.06 points, or 0.38%, to 6,863.74, and the Nasdaq Composite shed 221.18 points, or 0.92%, to 23,737.30.

At least five of the 11 S&P 500 sectors traded in the red, with information technology weighing heavily, down 1.2%.

The Federal Reserve delivered a widely expected quarter-point rate cut on Wednesday, but also raised doubts over future policy action by saying another cut in December was not a "foregone conclusion".

Traders quickly pared back odds on another similar‑sized reduction in December to about 70%, down from roughly 90% earlier in the week.

Meanwhile, a freshly announced trade agreement between U.S. President Donald Trump and China's Xi Jinping did little to improve overall sentiment.

Trump agreed to roll back some tariffs on Chinese imports in exchange for Beijing resuming soybean purchases, keeping rare earth exports flowing and cracking down on fentanyl trafficking.

In other stocks, Merck & Co slipped 1.2% despite posting higher third-quarter revenue, while drug distributor Cardinal Health climbed 16.7% after raising its annual adjusted profit forecast.

Of the 222 companies in the S&P 500 that have reported so far, 84.2% posted earnings above estimates, according to LSEG data as of Wednesday. That is above the 77% average of the last four quarters.

Chipotle Mexican Grill tumbled more than 17% after the burrito chain axed its annual sales forecast, with tariffs and inflation squeezing margins.

Declining issues outnumbered advancers by a 1.2-to-1 ratio on the NYSE, with 82 new highs and 113 new lows.

Declining issues outnumbered advancers by a 1.34-to-1 ratio on the Nasdaq, with 1,824 stocks rising and 2,445 down.

The S&P 500 posted 29 new 52-week highs and 28 new lows, while the Nasdaq Composite recorded 59 new highs and 126 new lows.

(Reporting by Pranav Kashyap and Nikhil Sharma in Bengaluru; Editing by Krishna Chandra Eluri, Shinjini Ganguli and Pooja Desai)