The US stock market witnessed a sharp decline on Thursday amid Windows maker Microsoft (MSFT, Financial) and Meta (META, Financial) disclosing more than anticipated spending on artificial intelligence, causing the S&P 500 to decline by 1.5% and the Nasdaq Composite to slump by 2.5%. These developments have amplified doubts about the business model of high-tech, aggregate, and industry/consumer sentiment indexes.

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While these tech titans have delivered better-than-expected earnings, Microsoft, Meta, and other technology companies like Nvidia (NVDA, Financial), Amazon (AMZN, Financial), and Apple's (AAPL, Financial) forward guidance has been offset by their warnings about the rising costs of deploying AI. This has affected not only their stock prices but also their ability to maintain their profit margins in light of an aggressive foray into AI technologies.

There was a rise in Treasury yields, with 10-year notes trading over 4.3%, which is known to depress demand for equities. Furthermore, the data on Inflation published by the Federal Reserve stated that the PCE price index was up to 0.2% for September, while the core PCE rate was slightly higher than expected at 2.7%. This Statutory revision at this point has brought about speculation that the Federal Reserve might halt the expected interest rate cuts, which is fundamental to uncertainty in the cautious market.

Business people are now facing a new pair of issues: reduced profitability in the sphere of technology as the sector overinvests in AI and potential shifts in federal money policies. The general conditions of the existing market indicate how technological advancements are aligned with the financial responsibility of making those advances.

This article first appeared on GuruFocus.