Key Takeaways
- Microsoft (MSFT) reported that Azure revenue surpassed $100 billion for fiscal year 2026, though massive AI capital expenditures totaling $41 billion in Q4 weighed on investor sentiment.
- The Federal Open Market Committee (FOMC) held interest rates steady at 3.5%-3.75%, but a 9-3 split vote and hawkish rhetoric from Chairman Kevin Warsh sent the Nasdaq 100 into a technical correction.
- Qualcomm (QCOM) and Arm Holdings (ARM) issued weak forward guidance, overshadowing Qualcomm's announcement of new custom silicon revenue expected in the December quarter.
- U.S. Treasury yields surged to nearly two-decade highs, with the 30-year yield reaching levels not seen since 2007 as Brent crude topped $90 per barrel.
- Lam Research (LRCX) provided a bright spot in the semiconductor equipment space, beating Q4 estimates and issuing a strong Q1 EPS outlook of $2.00-$2.30.
U.S. equity markets faced a sharp downturn on Wednesday as a combination of hawkish central bank signals and mixed Big Tech earnings triggered a broad retreat. The S&P 500 fell 1.5%, while the Nasdaq 100 entered a technical correction, now sitting 11% below its recent record high.
The Federal Reserve opted to maintain the federal funds rate at 3.5%-3.75%, but the decision was far from unanimous. Three hawkish dissenters—Logan, Hammack, and Kashkari—voted for an immediate quarter-point hike, while Chairman Kevin Warsh warned that the pause was not a sign of "inertia" in the fight against resurgent inflation.
Microsoft (MSFT) revealed via an internal memo from CFO Amy Hood that its Azure cloud business has officially become a $100 billion annual revenue engine. Despite this milestone and Copilot paid seats exceeding 30 million, the company's $41 billion quarterly capex spend and a broader tech sell-off pressured the stock.
In the semiconductor sector, Qualcomm (QCOM) CEO Cristiano Amon confirmed that two near-term custom silicon wins will begin generating revenue in the December quarter. However, both Qualcomm and Arm Holdings (ARM) issued disappointing guidance, contributing to the downward pressure on the Philadelphia SE Semiconductor Index.
Meta Platforms (META) also contributed to the late-hours gloom, providing a disappointing revenue forecast that offset a larger-than-expected sales increase from Microsoft's cloud unit. Conversely, Starbucks (SBUX) and Chipotle (CMG) bucked the trend by raising their annual outlooks following resilient consumer demand.
Fixed income markets saw significant volatility, with a New York Fed index indicating the highest level of dysfunction in the high-grade corporate bond market in nearly three years. Long-dated yields spiked as investors priced in "higher for longer" rates, fueled by Brent crude prices climbing above the $90 mark.
In the AI space, Anthropic reported technical issues affecting its models, while the U.S. government announced it will host a major AI Summit in Lima, Peru, on September 8. Meanwhile, Lam Research (LRCX) outperformed expectations with $6.72 billion in revenue, signaling continued demand for chip-making equipment despite the macro headwinds.
Ed Liston is a senior contributing editor at TheStockMarketWatch.com. An active market watcher and investor, Ed guides an independent team of experienced analysts and writes for multiple stock trader publications.