The Fed, Microsoft and Alphabet Test the Chip Rally

NEW YORK, Oct. 27 — ChipChip stocks rose for a third straight session on Tuesday, and on Wednesday the rally meets the Federal Reserve’s rate decision and quarterly reports from Microsoft and Alphabet. The PHLX Semiconductor index gained 3.60 percent, to 11,482.50, and the S&P 500 rose 0.60 percent, to 7,722.60, 1.2 percent below its record close of Oct. 6.

“The buzz surrounding details of Anthropic’s impending initial public offering helped boost chip stocks for the third consecutive session,” Reuters reported. The advance was narrow: “The majority of stocks within the S&P 500 fell, but the gains for influential AI stocks made up for that,” AP reported.

The yardsticks for Wednesday’s reports are the companies’ own, set in July, when Microsoft forecast more than $50 billion of capital spending for its quarter and Alphabet raised its spending range for the year. For the spenders, the bill shows in their cash: analysts expect Alphabet to report negative free cash flow of $2.3 billion for the quarter, by FactSet’s consensus as reported by CNBC. “The singular focus on the investors’ minds is really what the capex guidance trajectory looks like across the hyperscaler space,” Richard Cheng, head of Nuveen’s investment-grade corporate sector team, said, as quoted by CNBC.

The Nasdaq composite rose 1.18 percent and the Dow Jones industrial average 0.03 percent. Meta Platforms fell 1.64 percent, to $620.19, below the $625.00 a share at which it priced $25 billion of Class A stock for its forward sale agreements, in a release distributed early Tuesday.METANasdaq614.99▼9.53−1.5%Meta Platforms · Friday’s session

After the Bell

After the close, three suppliers reported quarters above the midpoints of their own forecasts, and their shares fell 5 to 7 percent in after-hours trading. NXP Semiconductors, the chipmaker, reported revenue of $3.79 billion, up 19 percent from a year earlier; Teradyne, which makes test equipment for chips, $1.31 billion, up 70 percent, “above the high end of our guidance,” Greg Smith, its chief executive, said in the company’s release; and Seagate Technology, the data-storage maker, $4.23 billion, up 61 percent. NXP and Seagate forecast more revenue for the current quarter, and Teradyne about the same.The ForecastsNXP had forecast third-quarter revenue of $3.65 billion to $3.85 billion, and Seagate fiscal first-quarter revenue of $4.1 billion, plus or minus $100 million. For the current quarter NXP forecasts $3.75 billion to $3.95 billion, Teradyne $1.25 billion to $1.35 billion and Seagate $4.8 billion, plus or minus $100 million.

At their last trades before the after-hours session ended at 8 p.m., NXP stood 6.9 percent below its close, Seagate 5.5 percent and Teradyne 5.1 percent, by Nasdaq’s figures. All three had risen 3 to 5 percent during the regular session.

Wednesday

The Fed announces its decision at 2 p.m. and is expected to hold its target range at 3.75 to 4 percent, where it put it on Sept. 16, according to CME Group’s FedWatch tool, as Reuters reported. Futures trading put the chance of a rise this week at about 10 percent and of one in December at better than 80 percent, CNBC reported, citing FedWatch. Kevin Warsh, the chairman, holds a press conference. He “is likely to signal that recent inflation data reinforce expectations from the September meeting that further tightening will likely be needed over time,” Brett Ryan, senior U.S. economist at Deutsche Bank, wrote in a note quoted by CNBC.

Oracle holds its investor day at its Oracle AI World conference at 11:55 a.m. Eastern.

Alphabet’s call is at 4:30 p.m. Eastern. On the July earnings call, Anat Ashkenazi, its chief financial officer, raised the 2026 range for capital spending to $195 billion to $205 billion, and said Alphabet continued “to expect our CapEx to increase significantly in 2027.” Analysts expect Alphabet’s third-quarter capital spending to be $55.2 billion, by FactSet’s consensus as CNBC reported it, which would leave $59.2 billion to $69.2 billion for the fourth quarter if it is to land in its 2026 range, by this paper’s arithmetic. It spent $80.6 billion in the first half.GOOGLNasdaq279.84▼3.98−1.4%Alphabet · Friday’s session

Asked by Brian Nowak of Morgan Stanley how Alphabet was budgeting for 2027, Ms. Ashkenazi said demand still outpaced its investment. “But as long as we see these attractive opportunities to invest, we will continue to invest,” she said. Google Cloud’s backlog was $514 billion at the end of June, of which Alphabet expects to recognize just over half as revenue within 24 months.

But as long as we see these attractive opportunities to invest, we will continue to invest.

Microsoft reports after the close. On the July earnings call, Amy Hood, its chief financial officer, said capital spending in the quarter would be “over $50 billion,” counting the effect of a change in how it accounts for data-center leases, against $41 billion in the quarter to June. She forecast Azure growth of about 45 percent in constant currency.MSFTNasdaq521.91▼8.23−1.6%Microsoft · Friday’s session

Microsoft has since adjusted its July Azure forecast: on Sept. 2 it moved some developer and security services out of Azure and, describing the change as mechanical, put Azure’s growth at 44 to 45 percent in constant currency.The New AzureFrom this quarter Microsoft reports two segments, Agents and Infra and Devices and Consumer, instead of three. GitHub cloud, other developer cloud services and Security Copilot moved from Azure to Microsoft 365 commercial cloud, and its Healthcare and Life Sciences cloud to a new Industry solutions line. Restated, Azure’s growth in the June quarter was 42 percent rather than 43. The spending forecast did not change. On the new basis, Azure’s revenue a year earlier was $22.4 billion. Analysts expect $32.2 billion this time, by Bloomberg’s consensus as reported by Yahoo Finance, or about 44 percent more, by this paper’s arithmetic.

The report comes two days after Microsoft introduced a Voluntary Exit Offer for eligible employees in participating teams in Canada, India, Britain and the United States “at level 70 and below,” as Amy Coleman, its chief people officer, wrote. It is offering buyouts to around 60,000 employees, Microsoft confirmed to TechCrunch, which reported that workers in data centers, sales and marketing are among those excluded and that the terms are similar to Microsoft’s standard severance. That is about 27 percent of the 223,000 people Microsoft employed at the end of June, by TechCrunch’s headcount and this paper’s arithmetic.The Earlier OfferMs. Coleman wrote that the offer builds on “what we learned earlier this year through the Voluntary Retirement Program.” More than 30 percent of the roughly 8,750 employees eligible for that buyout accepted it, TechCrunch reported.

KLA, which sells process-control equipment to chipmakers, also reports after the close, against its July forecast of $4.0 billion of revenue, plus or minus $200 million. Its call is at 5 p.m. Eastern.

Then Seoul

Samsung Electronics holds its call at 10 a.m. Thursday in Seoul, 9 p.m. Wednesday in New York, after a record quarter from SK hynix and a 6.63 percent rise in the Kospi on Wednesday. Amazon’s call is at 5 p.m. Eastern on Thursday, and Intel reports after the close the same day; Apple follows on Monday, Nov. 2, and AMD on Tuesday, Nov. 3.

What to watch on Wednesday evening: Azure against 44 to 45 percent, Microsoft’s capital spending against more than $50 billion, and any first figure from Alphabet for 2027.