How AI is Becoming a Bearish Factor for the Nasdaq 100

In 2024, the Nasdaq 100 index (US Tech 100 mini on FXOpen) has risen by approximately 20%, with optimism around the integration of artificial intelligence (AI) acting as one of the bullish drivers.

However, yesterday's reports from Microsoft (MSFT) and Meta Platforms (META) indicated that AI, as a factor influencing stock prices, may be shifting from a bullish to a bearish driver. The issue lies in the rising expenses that these tech giants are incurring in the race for leadership in this area.

Earlier today, we noted that due to increasing expenditures, MSFT shares fell by roughly 4%, despite a strong earnings report.

A similar trend is seen in Meta Platforms' stock: actual earnings per share and gross revenue exceeded analysts’ expectations. However, due to high capital investments, META shares in pre-market trading today are around 3% lower than yesterday's opening.

Meanwhile, technical analysis of the Nasdaq 100 (US Tech 100 mini on FXOpen) index chart indicates several bearish signals:

→ Since mid-September, price fluctuations have formed an ascending channel, constructed using linear regression (shown in blue). However, following the reports from Microsoft and Meta Platforms, the index value has sharply dropped from the upper half of the channel to its lower boundary.

→ The pattern of peaks A-B-C-D shows that bulls find it difficult to maintain momentum: each successive peak only slightly exceeds the previous one, followed by a decline.

Considering this information, it is reasonable to assume that the current ascending channel may be unable to drive the price to the July 11 peak and could be breached by bears. Additionally, the formation of a bearish channel is not out of the question (its preliminary outline is shown in red).