U.S. Equities Decline as Investors Anticipate Inflation Data; Alibaba Gains on AI Investment, While Semiconductor Stocks Exhibit Mixed Performance

U.S. Equities Decline Ahead of Key Inflation Data

U.S. stock indexes closed lower for a third consecutive session on Thursday, as market participants digested a series of economic indicators and positioned themselves ahead of the anticipated August Personal Consumption Expenditures (PCE) index report, the Federal Reserve's preferred inflation metric. Futures for the Dow Jones Industrial Average, S&P 500, and Nasdaq Composite each registered modest declines, signaling a potentially negative open and contributing to broader market unease.

Market Performance and Key Economic Indicators

On Thursday, the Nasdaq, S&P 500, and Dow Jones Industrial Average declined by 0.5%, 0.5%, and 0.4% respectively. This continued a trend of losses following three consecutive record-high closes earlier in the week. Investors assessed several economic data points, including a final upward revision to second-quarter GDP, which now stands at a 3.8% annual growth rate, up from 3.3%. Additionally, weekly jobless claims decreased to 218,000 from 232,000, monthly durable goods orders rebounded, and August existing home sales remained relatively flat. The yield on the 10-year Treasury note also increased, rising to 4.18% from 4.15% at Wednesday's close, reflecting shifts in borrowing cost expectations.

Divergent Trends Among AI-Linked Equities

The technology sector presented a mixed picture, particularly among companies associated with artificial intelligence. Several previously "hot" AI-linked stocks continued their recent slide. Oklo Inc. (OKLO) fell by 16.07% during the week, impacted by a downgrade from Seaport Global to Neutral and a neutral initiation from Goldman Sachs. Astera Labs, Inc. (ALAB) experienced a 17.63% weekly decline, with premarket trading seeing a 6.03% drop amid concerns that a potential partnership between Intel (INTC) and NVIDIA (NVDA) in PC and data center chips could adversely affect its business, as noted by Morgan Stanley. Credo Technology Group Holding Ltd (CRDO) also saw a significant weekly decrease of 14.81%, with a 6.14% drop in premarket trading. This pullback in certain AI-linked stocks may signal a reassessment of valuation and momentum, potentially influenced by a slower-than-expected pace of interest rate cuts.

Conversely, Alibaba Group Holding Limited (BABA) shares surged by approximately 9% in premarket trading, reaching a four-year high of up to $178.11. This substantial rally is primarily attributed to the e-commerce and tech giant's aggressive pivot towards artificial intelligence and renewed investor confidence in Chinese technology firms. Alibaba's year-to-date returns stand at 97.12%, significantly outperforming the Hang Seng Index. The company reported a 5.86% year-over-year revenue increase to RMB 996.35 billion for fiscal year 2025, alongside a 62.62% surge in net income to RMB 130.11 billion. Alibaba has committed US$52.4 billion over three years to AI and cloud infrastructure, an investment that surpasses its total AI spending over the past decade. Its Cloud Intelligence Group demonstrated robust performance, with AI-related products achieving triple-digit year-over-year growth for six consecutive quarters.

Micron Technology's Unexplained Decline Despite Strong Fundamentals

Micron Technology (MU) shares fell by 3% on Thursday, adding to a nearly 3% decline from the previous day, despite reporting robust fiscal fourth-quarter 2025 earnings and providing positive guidance. The memory-chip maker reported adjusted earnings of $3.03 per share on $11.3 billion in sales, surpassing analyst estimates of $2.86 per share and $11.2 billion in revenue. Quarterly sales grew 45% year-over-year, and management forecast strong sequential growth for fiscal Q1 2026. However, investor concerns reportedly centered on the company's free cash flow. While Micron generated $17.5 billion in operating cash flow for fiscal 2025, it allocated almost all of this to capital expenditures, resulting in a free cash flow of only $1.7 billion for the year. This suggests that for every dollar of GAAP profit, the company generated only approximately $0.20 in real cash profit.

Broader Market Movements and Notable Performers

Beyond the core narratives, other significant movements were observed. Bitcoin's decline accelerated, with the cryptocurrency falling 3.5% to below $110,000, impacting crypto-tied stocks like MARA Holdings (MARA) and MicroStrategy (MSTR), which were down 9% and 7% respectively. Oracle (ORCL) shares fell 5.6% for their third consecutive day of declines, and Tesla (TSLA) stock ended down more than 4%.

Conversely, Intel (INTC) shares surged approximately 9%, pacing the S&P 500 and Nasdaq, following a more than 6% jump on Wednesday. This upward movement came after Bloomberg reported discussions regarding Apple (AAPL) potentially acquiring a stake in the chipmaker. IBM (IBM) shares also gained 5%, leading the Dow Jones, after HSBC indicated its use of IBM quantum computers for algorithmic bond trading. At the other end of the spectrum, CarMax (KMX) was the worst-performing stock in the S&P 500, with its shares declining 20% after the used-car retailer's second-quarter results widely missed analysts' estimates.

Looking Ahead: Inflation Data and Tech Sector Scrutiny

The market's focus will now turn to the forthcoming August PCE index data, which will provide further clarity on inflation trends and potentially influence future Federal Reserve monetary policy decisions. The divergent performance within the technology sector, particularly between established players making strategic AI investments (like Alibaba) and emerging "hot" AI stocks experiencing pullbacks, suggests increasing investor scrutiny on fundamental strength and sustainable growth trajectories. The free cash flow concerns impacting Micron Technology also highlight a broader market trend of investors looking beyond headline earnings to underlying financial health.