U.S. equity futures were essentially flat early Thursday as traders awaited further developments on a potential deal to reopen the Strait of Hormuz, while fresh skepticism about the sustainability of the artificial intelligence spending boom helped put pressure on technology-related shares.
By 05:42 ET (09:42 GMT), futures pointed to a muted start on Wall Street. The session’s balance reflected weakness in semiconductor and data storage companies counterbalanced by strength among selected software and industrial names.
Memory storage names were notable sources of downside after quarterly reports from companies in that space failed to meet the lofty expectations investors had built following a strong AI-driven rally earlier in the year. Sandisk recorded a steep premarket decline of 9.2%, and Western Digital slumped 14.6% as market participants questioned whether demand growth will be adequate to support the rich valuations across the AI infrastructure supply chain.
Software giant Oracle extended a pullback, falling 2.5% as investors focused on concerns about its balance sheet. That unease followed reports that its five-year credit default swap spreads had risen to record levels amid heavy debt-funded investment in AI infrastructure.
Not all technology names were weaker. Payroll software provider Paycom Software posted a second-quarter performance that beat Wall Street forecasts and sparked a notable premarket rally. Shares climbed 13.1% after the company reported adjusted earnings per share of $2.78, comfortably above consensus estimates of $2.38. Revenue increased 10% year-on-year to $531.2 million, and expanding profit margins added to the upbeat reaction from investors.
Other notable movers included Aeva Technologies, which rose 17.7% after reporting quarterly results ahead of expectations and announcing plans to expand into AI data center infrastructure, signaling a potential growth avenue beyond its automotive lidar applications. SurgePays surged 57.5% following the announcement of a new wireless distribution joint venture that meaningfully broadens its prepaid mobile retail footprint. Mangoceuticals climbed 31.9% after its proposed merger partner reported progress on developing a transportable nuclear microreactor.
On the downside, several companies trimmed outlooks or reported results that failed to satisfy investors despite some beats. EPAM Systems fell 9.1% after lowering its full-year revenue growth outlook, even though its quarterly earnings and revenue beat expectations. LegalZoom plunged 23% after cutting its full-year revenue forecast and citing a sharp slowdown in customer traffic from Google Search plus weaker efficiency in paid search advertising, despite narrowly beating earnings estimates.
Verra Mobility dropped 11.5% after lowering its annual revenue guidance, saying renewed tolling contracts with Avis Budget Group and Hertz will generate materially lower economics even though second-quarter earnings and revenue topped estimates. Honeywell Aerospace, in its first earnings report since spinning off from the parent company, fell 13.1% after slashing its full-year financial outlook despite solid quarterly revenue growth and healthy order trends.
Other retreating names included Inseego, which declined 12.5% after reporting a wider-than-expected quarterly loss and lowering its full-year revenue outlook, and online resale marketplace ThredUp, which sank nearly 30% after trimming annual revenue guidance despite meeting quarterly sales expectations. Recon Technology tumbled almost 30% as investors reacted to the potential dilution from a recently announced $100 million at-the-market equity offering.
Market takeaways
- Investor focus remains split between geopolitical developments - specifically the reported potential reopening of the Strait of Hormuz - and the outlook for AI-related spending.
- Data storage and semiconductor names are under pressure as recent quarterly results failed to match elevated expectations tied to AI demand.
- Selective software and industrial companies are providing support to futures, with Paycom’s strong quarter a clear example of earnings-driven upside.
Notable company moves mentioned
- Paycom Software - shares up 13.1% after reporting adjusted EPS of $2.78 and revenue of $531.2 million, a 10% year-on-year increase.
- Sandisk - down 9.2% premarket after quarterly results disappointed relative to expectations.
- Western Digital - slumped 14.6% after reporting results that failed to justify investor expectations.
- Oracle - down 2.5% as concerns mounted about its balance sheet amid debt-funded AI investments and rising CDS spreads.
- Aeva Technologies, SurgePays, Mangoceuticals - posted significant gains after company-specific catalysts tied to results, strategic expansion, or merger progress.
- EPAM Systems, LegalZoom, Verra Mobility, Honeywell Aerospace, Inseego, ThredUp, Recon Technology - each experienced notable declines driven by weaker guidance, reduced outlooks, or potential dilution.
Investors will be watching for further corporate updates and any confirmation or denial regarding developments in the Strait of Hormuz, both of which could influence market direction in the near term.