US stock futures declined on Thursday as investors assessed rising government bond yields, renewed concerns about Middle East energy supplies and reports of substantial borrowing plans linked to artificial intelligence infrastructure.
Attention also turned to quarterly results from Applied Digital (NASDAQ:APLD), preliminary earnings from Samsung Electronics (USOTC:SSNHZ) and minutes from the Federal Reserve’s September monetary policy meeting.
At 02:54 ET (06:54 GMT), Dow Jones futures were down 262 points, or 0.5%, while S&P 500 futures declined 23 points, or 0.3%. Nasdaq 100 futures fell 154 points, also representing a 0.5% decrease.
The declines followed losses across Wall Street during the previous session, when concerns about global debt markets and higher oil prices weighed on investor sentiment.
European Bond Market Weakness Raises Concerns About Financial Conditions
Government bond yields increased across several major economies amid growing concerns about France’s fiscal outlook and the potential for financial market pressures to spread across Europe.
The difference between French and German 10-year government bond yields was heading towards its largest increase since the COVID-19 pandemic in 2020 before narrowing later in the session.
Deutsche Bank analysts identified France as a central source of renewed volatility in global bond markets, highlighting widening sovereign bond spreads across several European countries.
The increase in borrowing costs extended beyond France. The yield on the UK’s benchmark 10-year government bond reached its highest level since 2007, while Italian government bond yields also advanced.
Higher oil prices, driven by concerns about supply disruptions in the Middle East, added to inflation worries and contributed to upward pressure on bond yields.
In the United States, a well-received auction of 10-year Treasury notes helped stabilise parts of the government bond market. However, the 30-year Treasury yield reached its highest level in more than two decades.
The benchmark US 10-year Treasury yield was subsequently trading at 5.327%.
Rising government borrowing costs have increased concerns about financial conditions and their potential impact on equity valuations and corporate investment.
AI Infrastructure Financing Plans Add to Debt Market Uncertainty
Reports of substantial financing arrangements involving major technology companies have added to concerns about the amount of new debt entering global markets.
According to The Wall Street Journal, Broadcom (NASDAQ:AVGO) has been seeking more than $50 billion in financing to support the development of a custom artificial intelligence chip being created jointly with OpenAI.
The publication also reported that Oracle (NYSE:ORCL) was holding discussions with Apollo and Goldman Sachs regarding financing for a major chip purchase.
Separately, the Financial Times reported earlier in the week that SpaceX was discussing approximately $40 billion in financing with lenders to purchase Nvidia processors.
The potential transactions highlight the substantial investment required to develop AI computing infrastructure, including advanced processors, data centres and supporting equipment.
Analysts at Vital Knowledge suggested that continued demand for debt financing from AI-related businesses could make it more difficult for US Treasury yields to decline.
Large financing transactions may increase competition for institutional capital as technology companies seek to fund their infrastructure expansion.
Applied Digital Revenue Jumps 322% as Capital Spending Surges
Applied Digital (NASDAQ:APLD) reported a substantial increase in fiscal first-quarter revenue, reflecting continued demand for data centre infrastructure supporting artificial intelligence applications.
Revenue rose 322% year on year to $342 million, exceeding Wall Street expectations.
Adjusted core earnings reached $64.4 million, also surpassing analysts’ forecasts.
However, the company’s spending on property and equipment increased considerably faster than revenue, highlighting the capital-intensive nature of AI infrastructure development.
Purchases of property and equipment rose 730% from the previous year to $2.074 billion, significantly exceeding the company’s reported cash flow of $64 million.
The figures illustrate the scale of investment required to expand data centre capacity and install the equipment needed to support advanced AI workloads.
Vital Knowledge analysts highlighted the contrast between Applied Digital’s rapid revenue growth and its substantial capital requirements.
Applied Digital shares advanced in after-hours trading following the results.
Samsung Reports Record Third-Quarter Profit Despite Mixed Expectations
Samsung Electronics (USOTC:SSNHZ) forecast its strongest third-quarter operating profit on record, supported by demand for memory chips used in artificial intelligence applications.
The South Korean technology company estimated operating profit of approximately 107.40 trillion won, equivalent to around $80.1 billion, for the three months ended 30 September.
The figure represented a substantial increase from the 12.2 trillion won reported during the corresponding period a year earlier.
However, the preliminary result fell slightly below Bloomberg’s consensus forecast of 108.67 trillion won, although it exceeded the 106.1 trillion won estimate compiled by LSEG.
Samsung also reported that third-quarter sales more than doubled to 195 trillion won, compared with 86.06 trillion won a year earlier.
The company recorded its fourth consecutive quarter of record profits.
Despite the strong year-on-year performance, Samsung shares declined during volatile trading, contributing to weakness in South Korea’s KOSPI index.
Shares in rival memory chip manufacturer SK Hynix also fell.
Federal Reserve Minutes Suggest October Rate Pause Remains Likely
Minutes from the Federal Reserve’s September meeting indicated that policymakers were prepared to assess incoming economic information before deciding whether to increase interest rates again.
The central bank raised rates at its September meeting for the first time since 2023 as part of its efforts to contain inflation.
Although officials continued to express concerns about inflationary pressures, the minutes suggested there was limited urgency to implement another increase at the October meeting.
Most policymakers nevertheless considered an additional increase in the federal funds rate likely to be appropriate before the end of 2026.
The assessment left open the possibility that the Federal Reserve could maintain rates at its 27–28 October meeting before considering another increase in December.
According to CME FedWatch, markets were pricing in approximately a 78% probability that rates would remain unchanged in October and a 67% probability of an increase at the December meeting.
The outlook for US interest rates remains an important consideration for investors as higher bond yields, rising energy prices and substantial corporate financing requirements continue to influence global financial markets.