U.S. stock futures were mixed on Wednesday morning, with the Nasdaq leading declines as investors reassessed the earnings outlook for high-flying artificial intelligence names. Dow futures edged up about 0.2%, while Nasdaq 100 futures slipped 0.6%, signaling a cautious open for cash markets at 09:30 EDT.
Four growth stocks—Western Digital (WDC), Sandisk (SNDK), Datadog (DDOG), and AppLovin (APP)—all fell between 10% and 19% in premarket trading, despite reporting strong quarterly results. The declines underscore a shift in market sentiment: investors are no longer satisfied with merely strong earnings; they demand exceptional performance that beats already-lofty expectations.
Western Digital dropped 15.2% after posting adjusted EPS of $3.56 versus the $3.31 consensus, and revenue of $3.75 billion. The company's guidance for the next quarter was only marginally above projections, disappointing investors who had bid the stock up more than threefold in 2026. Sandisk fell 10.2% despite adjusted EPS of $39.25 and revenue of $8.97 billion; its revenue outlook of $10.3 billion to $10.8 billion came in below the $10.82 billion midpoint estimate.
Datadog slid 15% even as revenue grew 36% to $1.12 billion and the company raised its full-year forecast. The stock had doubled this year, and optimism was already priced in. AppLovin tumbled 18.5% after earnings per share met estimates at $3.76, but revenue and adjusted EBITDA missed forecasts, and third-quarter guidance was weak.
The selling pressure extended across the hardware sector. Seagate Technology (STX) fell 3.6%, Micron Technology (MU) dropped 3.7%, and Advanced Micro Devices (AMD), Marvell Technology (MRVL), and Intel (INTC) each slipped about 1%. Analysts at InvestorPlace noted that markets had factored in expectations of “outright acceleration,” making “merely excellent” results insufficient.
Despite the selloff, broker ratings remain largely positive. All four companies hold Buy or Overweight consensus ratings. However, the median price targets imply limited upside for some: Datadog's target suggests just 3% upside from the August 5 close, while Sandisk's implies 85% upside. This disconnect highlights how saturated positioning can leave stocks vulnerable even with positive analyst sentiment.
Economic data offered no clear catalyst for rate cuts. Initial jobless claims totaled 199,000, below the expected 202,000, while continuing claims rose to 1.801 million. Preliminary second-quarter productivity increased 1.4%, beating the 0.6% forecast, and unit labor costs rose 1.3%. The 10-year Treasury yield dipped to 4.64%, and futures markets still see nearly even odds of a Fed pause or hike in September.
Wells Fargo chief U.S. economist Tom Porcelli said, “Higher long-term rates are not going away anytime soon,” citing economic strength and AI-driven productivity gains. The upcoming July employment report on Friday is the next key test, with analysts expecting 80,000 new jobs and a steady 4.2% unemployment rate.
Investor takeaway: AI demand remains robust, but valuations are facing new scrutiny. Unless prices or expectations adjust, momentum stocks could remain vulnerable even if they continue to beat earnings.
