According to Woofun AI, the October 28 FOMC meeting maintained the federal funds rate target range of 3.75%-4.00% with a 10-2 vote, but two members, Cook and Hammack, voted against and clearly advocated an increase of 25 basis points.
This rare difference caused the market to shift to pricing and interest rate hikes. The probability of a 25 basis point rate hike in December rose above 80%; the 10-year US Treasury yield rose above 5% on the same day to close at 5.02%. Meanwhile, Alphabet (GOOGL.US)'s free cash flow was negative for the second consecutive quarter due to huge AI capital expenditure. After the market, its stock price plummeted by nearly 10%, widening the gap from US$5.855 billion in the previous quarter to US$9.065 billion. A hawkish rift at the macro level is intertwined with a cash flow crisis at the micro level, reshaping the market's risk pricing logic for high-growth assets.
Alphabet's earnings data reveals the financial costs behind the AI boom. Although third-quarter revenue reached US$127.577 billion, up 25% year over year. Among them, Google Cloud exploded 103% to US$30.709 billion, but capital expenditure reached US$51.355 billion, which directly led to a drop in free cash flow to US$9.065 billion. Diluted earnings per share were $2.12, compared to $2.87 for the same period last year; excluding losses in equity securities, adjusted earnings per share were $2.67, lower than market expectations of $3.02. The company maintained its 2026 capital expenditure guidance and warned of a “significant increase” in investment in 2027.
Although the operating margin remained at 32%, “net other income (expenses)” changed from positive $12.759 billion to negative $8.221 billion, becoming a key variable that dragged down performance. After the market, GOOGL shares fell to $292.50, or 9.97%, with a turnover of 25.26 million shares. The market is re-evaluating the sustainability of AI investments, from simply focusing on revenue growth to examining the health of cash flow. This shift in valuation logic poses a serious challenge to capital-intensive tech giants.
In stark contrast to Alphabet is Microsoft (MSFT.US), whose earnings report shows a healthier input-output ratio. Revenue for the first fiscal quarter was $92.279 billion, up 19% year over year, with non-GAAP diluted earnings of $4.89 per share, higher than the forecast of $4.73; GAAP's $4.92 included a year-on-year increase in OpenAI investments due to loss to profit. Azure cloud business grew 48% year over year, with capital expenditure of $39.367 billion.
Despite also facing huge AI investments, Microsoft absorbed cost pressure through efficient cloud monetization capabilities, and MSFT shares rose 2.88% to $546.30 after the market, with a trading volume of 8.04 million shares.
This contrast shows that the market is no longer blindly pursuing the scale of AI investment, but is paying more attention to the economic return after investment. According to data compiled by Woofun AI, the combination of Microsoft's capital expenditure discipline and strong cloud growth rate has established a new benchmark for the financial health of tech giants in the AI era, and capital is shifting from simply being driven by stories to rational allocation based on actual cash flow.
The software and security sector faced collective revaluation after the market, and the sharp decline in ServiceNow (NOW.US) and Fortinet (FTNT.US) reflected deep market concerns about AI replacing traditional IT budgets. ServiceNow's after-market decline reached 18.07%, mainly due to its Q4 CRPO growth guide falling to 18.5%, down from 20.5% in the third quarter. Fortinet plummeted 25.71% after the market. Despite its third-quarter revenue of $2.08 billion, a year-on-year increase of 20%, and three increases in full-year revenue guidance, the non-GAAP gross margin of 79.6% fell below the forecast of 80.1%, and the fourth quarter guidance implied a decline in growth to 15.5%. As a result, the market interpreted the growth rate as slowing down. In an environment where 10-year US Treasury yields rise above 5% at a high discount rate, SaaS companies are extremely sensitive to minor changes in the growth rate. ServiceNow traded 7.22 million shares and Fortinet traded 3.08 million shares.
This sectorial valuation reset is not an isolated event, but rather reflects that in the context of rapid iteration of AI technology, long-term demand for traditional software and security products is facing structural uncertainty, and investors are rapidly revising their expectations for such high-term assets.
The semiconductor sector, on the other hand, showed a pattern of diversification of capital flows from software to hardware. The Philadelphia Semiconductor Index SOX rose 1.76%, with AMD up 3.24% to $578.44 and AVGO up 2.77% to $351.81. KLAC performed particularly strongly, closing up 3.33% to $158.77, then rising further to $165.04 after the session, or 3.95%. In contrast, NVDA fell 1.18% to $215.38, indicating that funding is also undergoing a structural shift within AI hardware.
The logic behind this phenomenon is that the software side is concerned about AI replacing existing budgets, while the hardware side benefits from continued investment in AI infrastructure construction. The same macro variables have had opposite effects on the two industry chains. Funding is seeking more deterministic hardware returns rather than uncertain software subscription growth.
The performance of other tech giants was relatively lackluster or under pressure. Apple fell 0.94% to $343.83, Tesla fell 0.80% to $404.22, and Meta fell 1.24% to $612.49. Amazon rose slightly by 0.59% to $254.60, while eBay surged 4.97% to $123.88 after the market, with a mid-day price of $118.02.
This differentiation suggests that in an environment of increased macro-uncertainty, investors prefer defensive assets or targets with unique growth narratives. Amazon is about to release its three-quarter report, and the balance between its cloud business and retail business will be the focus of market attention. The rise of eBay may be related to the resilience of its e-commerce business, while the decline in Apple and Meta reflects market concerns about the slowing growth of consumer tech giants.
On the main side of crypto US stocks, the focus was on MicroStrategy (MSTR.US) position details and financing restructuring. As of October 26, MicroStrategy held 848,517 bitcoins at a total cost of $64.02 billion. Based on the October 29 intraday price of $79,775, the market value of the position was $67.69 billion. Based on CNBC's market capitalization of $61.732 billion, the market capitalization/position ratio is 0.91 times, and floating profit is 5.74%. On October 28, Strategy approved daily dividend revisions for four preferred shares (STRF, STRC, STRK, STRD) through a special shareholders' meeting. Of these, STRC will take effect from November 1, 2026, and the rest will take effect from January 1, 2027.
This move aims to transform preferred shares into high-frequency dividend payment instruments to stabilize financing costs. MSTR closed at $145.16, up 2.66%, and fell slightly to $144.15 after the session, or 0.70%. Strive increased its holdings of 43,000 bitcoins by issuing preferred shares, corresponding to a market capitalization of $3.43 billion. The average purchase price of $82,732 was higher than the current price, and Strive's share price rose 1.46% to $27.53.
The Datavault AI (DVLT.US) asset withdrawal crisis has triggered a crisis of trust in the US crypto sector. The company signed an agreement with Scilex to sell 15 million shares for $150 million, pay in bitcoins for $112,915.52 per unit, equivalent to 1,328.43 BTC, and deposit them into the Biconomy wallet. The company then sold back 491.431 BTC in exchange for $40.5 million in cash, but the remaining assets could not be withdrawn.
The company announced that it will restate its 2025 three-quarter report, 2025 annual report, 2026 quarterly report, and semi-annual report, and is expected to reduce total assets of US$8.1 million, US$92.2 million, US$57.1 million, and US$49 million, respectively. DVLT shares fell from $0.13 on October 26 to $0.07 on the 27th, closing at $0.09 (last traded at $0.088) on the 28th. This is the first public disclosure of “holding coins on the book but unable to withdraw” in this DAT boom, directly breaking the market's default assumptions about the safety of custodial assets and shifting the valuation framework from “number of positions” to “verifiability of positions.”
The pan-crypto ecosystem and regulatory environment are also undergoing profound changes. Galaxy Digital made quarterly profits of $323 million and announced a $200 million buyback plan. SoFi disclosed 50.3 million crypto products with gross revenue of $162 million. Circle faces up to 20% revenue risk from AI agents identified by Mizuho, while Ark Invest bought $5.2 million of Circle shares and sold $15.9 million of its own Bitcoin ETF. Moody's gave Ripple an RLUSD investment grade rating, which is in direct competition with Circle's USDC. The CFTC sued Utah to directly affect the predictive market business of companies such as Robinhood due to the escalation of the federal-state conflict over the right to regulate predictive markets. In terms of accounting rules, FASB ASU 2023-08 requires that eligible crypto assets be measured at fair value, but the DVLT case shows that “can be confirmed” takes precedence over “how to measure”, and that lack of custodial control will cause assets to not be included in the table at all.
The situation in Iran continues to be tense in terms of geopolitical risks and future prospects. The conflict has been going on for 8 months. On October 22, Iran claimed that 7 oil tankers in the Strait of Hormuz were damaged, threatening to attack oil and AI infrastructure if the US and Israel resume attacks. On October 28, the media reported that the US is asking the Gulf countries to prepare for “resuming attacks on Iran after the midterm elections,” and Trump said on October 26 that there is a trade-off between “reaching an agreement” and a “complete settlement.” UBS data showed that Russian crude oil exports were only 10% lower than before the war, Brent oil prices remained in the $110-115 range, and the energy sector ETF (XLE) rose 0.35%. Midterm elections are scheduled for November 3, and congressional ownership of control will directly affect energy and crypto regulatory paths.
On October 29, the core PCE (expected 3.1%) and initial GDP value (expected 3.2%) will be announced. If the data is high, the 10-year yield may rise further, putting secondary pressure on technology stocks and crypto assets. Companies such as Eli Lilly, Mastercard, Amazon, Intel, Strategy, and Coinbase will release earnings reports after the market on October 29, and before the market for ExxonMobil, Chevron, and AbbVie on October 30. Warsh announced that starting in 2027, one of the eight meetings each year will be dedicated to discussing macroeconomic strategies and not voting on interest rates, increasing to 2 times in 2028. STRC daily dividends will take effect from November 1. The sharp decline between NOW and FTNT, if confirmed the next day, will drag down the entire SaaS sector.