According to Woofun AI, the October 28 FOMC meeting voted 10 to 2 to keep the federal funds target range at 3.75%-4.00%, but two members, Cook and Hammack, dissented and explicitly pushed for a 25 basis point hike.
This rare split pushed the market toward pricing in a rate increase, with the probability of a 25 basis point hike in December rising above 80%; the 10-year Treasury yield broke above 5% that day, closing at 5.02%.
Meanwhile, Alphabet (GOOGL.US) saw its shares plunge nearly 10% after hours as massive AI capital expenditure pushed free cash flow negative for a second consecutive quarter, with the shortfall widening from US$5.855 billion in the prior quarter to US$9.065 billion.
The hawkish rift at the macro level and the cash flow crisis at the micro level intertwined, reshaping the market's risk-pricing logic for high-growth assets.
Alphabet's AI Spending Comes at a Heavy Financial Cost
Alphabet's earnings data revealed the financial price of the AI surge.
Third-quarter revenue reached US$127.577 billion, up 25% year over year, with Google Cloud exploding 103% to US$30.709 billion, but capital expenditure hit US$51.355 billion, directly driving free cash flow to negative US$9.065 billion.
Diluted earnings per share came in at US$2.12, compared with US$2.87 a year earlier; excluding equity securities losses, adjusted earnings per share were US$2.67, below the market expectation of US$3.02.
The company maintained its 2026 capital expenditure guidance unchanged and warned that 2027 spending would "significantly increase."
Although the operating margin remained at 32%, "other income (expense), net" swung from positive US$12.759 billion to negative US$8.221 billion, becoming the key variable dragging on results.
GOOGL shares fell to US$292.50 after hours, down 9.97%, on volume of 25.26 million shares.
The market is reassessing the sustainability of AI investment, shifting from a narrow focus on revenue growth to scrutiny of cash flow health, and this change in valuation logic poses a severe challenge to highly capital-intensive tech giants.
Microsoft Offers a Sharp Contrast With Healthier Returns
In sharp contrast to Alphabet, Microsoft (MSFT.US) delivered financials showing a healthier input-output ratio.
First-quarter revenue was US$92.279 billion, up 19% year over year, and non-GAAP diluted earnings per share were US$4.89, above the expected US$4.73; the GAAP figure of US$4.92 included a year-over-year lift from the OpenAI investment turning profitable.
Azure cloud revenue grew 48% year over year, while capital expenditure was US$39.367 billion.
Despite facing similarly huge AI investment, Microsoft absorbed cost pressure through efficient cloud monetization, and MSFT shares rose 2.88% after hours to US$546.30 on volume of 8.04 million shares.
This contrast shows the market no longer blindly chases the scale of AI spending but places greater emphasis on the economic returns after investment.
Woofun AI data shows that Microsoft's capital expenditure discipline combined with strong cloud growth has established a new benchmark for the financial health of tech giants in the AI era, with capital shifting from pure story-driven allocation to rational allocation based on real cash flow.
Software and Security Names Face Broad Repricing
The software and security sector suffered a collective after-hours repricing, with steep declines in ServiceNow (NOW.US) and Fortinet (FTNT.US) reflecting deep market concerns that AI is replacing traditional IT budgets.
ServiceNow fell 18.07% after hours, mainly because its fourth-quarter cRPO growth guidance dropped to 18.5%, below the 20.5% in the third quarter.
Fortinet tumbled 25.71% after hours; although third-quarter revenue was US$2.08 billion, up 20% year over year, and it raised full-year revenue guidance for a third time, non-GAAP gross margin of 79.6% was below the expected 80.1%, and fourth-quarter guidance implied growth slowing to 15.5%, which the market read as a slowdown.
With the 10-year Treasury yield above 5% and a high discount rate environment, SaaS companies are extremely sensitive to subtle changes in growth.
ServiceNow traded 7.22 million shares, while Fortinet traded 3.08 million shares.
This sector-wide valuation reset is not an isolated event but reflects structural uncertainty over long-term demand for traditional software and security products amid rapid AI iteration, as investors quickly revise expectations for these long-duration assets.
Semiconductors Show Capital Rotating From Software to Hardware
The semiconductor sector showed a divergence in which capital flowed from software to hardware.
The Philadelphia Semiconductor Index SOX rose 1.76%, with AMD up 3.24% to US$578.44 and AVGO up 2.77% to US$351.81.
KLAC was especially strong, closing up 3.33% at US$158.77 and rising further after hours to US$165.04, a gain of 3.95%.
By contrast, NVDA fell 1.18% to US$215.38, showing that capital is also rotating structurally within AI hardware.
The logic behind this is that the software side fears AI will replace existing budgets, while the hardware side benefits from continued investment in AI infrastructure.
The same macro variable produced opposite effects across the two supply chains, as capital seeks more certain hardware returns rather than uncertain software subscription growth.
Other tech giants were relatively flat or under pressure.
Apple fell 0.94% to US$343.83, Tesla fell 0.80% to US$404.22, and Meta fell 1.24% to US$612.49.
Amazon edged up 0.59% to US$254.60, while eBay surged 4.97% after hours to US$123.88, from an intraday price of US$118.02.
This divergence suggests that in an environment of rising macro uncertainty, investors prefer defensive assets or names with unique growth narratives.
Amazon is about to report third-quarter results, and the balance between its cloud and retail businesses will be a market focus.
eBay's rise may be tied to the resilience of its e-commerce business, while declines in Apple and Meta reflect concerns about slowing growth at consumer tech giants.
MicroStrategy and Crypto-Linked U.S. Stocks in Focus
On the main crypto-linked U.S. equity theme, MicroStrategy (MSTR.US) holdings details and financing structure adjustments became the focus.
As of October 26, MicroStrategy held 848,517 bitcoins at a total cost of US$64.02 billion.
Based on the October 29 intraday price of US$79,775, the holdings had a market value of US$67.69 billion.
Using the CNBC figure of US$61.732 billion in market capitalization, the market value-to-holdings ratio was 0.91 times, with an unrealized gain of 5.74%.
On October 28, Strategy approved amendments to daily dividends for four preferred stocks (STRF, STRC, STRK, STRD) at a special shareholder meeting, with STRC effective from November 1, 2026, and the others from January 1, 2027.
The move aims to transform the preferred stocks into high-frequency distribution tools to stabilize financing costs.
MSTR closed at US$145.16, up 2.66%, and edged down after hours to US$144.15, a decline of 0.70%.
Strive increased its bitcoin holdings by 43,000 coins through preferred stock issuance, corresponding to a market value of US$3.43 billion, with an average purchase price of US$82,732 above the current price; Strive shares rose 1.46% to US$27.53.
Datavault AI's (DVLT.US) asset withdrawal crisis triggered a trust crisis in the crypto-linked U.S. equity sector.
The company signed an agreement with Scilex to sell 15 million shares for US$150 million, paid in bitcoin at US$112,915.52 per coin, equivalent to 1,328.43 BTC, deposited into a Biconomy wallet.
The company then sold back 491.431 BTC for US$40.5 million in cash, but the remaining assets could not be withdrawn.
The company announced restatements of its 2025 third-quarter report, 2025 annual report, 2026 first-quarter report, and 2026 interim report, with expected reductions in total assets of US$8.1 million, US$92.2 million, US$57.1 million, and US$49 million, respectively.
DVLT shares fell from US$0.13 on October 26 to US$0.07 on October 27, and closed at US$0.09 on October 28 (last traded price US$0.088).
This is the first public disclosure in the current DAT boom of "holding coins on the books but being unable to withdraw them," directly breaking the market's default assumption about the safety of custodied assets and shifting the valuation framework from "number of holdings" to "verifiability of holdings."
Broader Crypto Ecosystem and Regulatory Shifts
The broader crypto ecosystem and regulatory environment are also undergoing profound changes.
Galaxy Digital reported quarterly profit of US$323 million and announced a US$200 million buyback plan.
SoFi disclosed 503,000 crypto products with gross revenue of US$162 million.
Circle faces a Mizuho warning that AI agents could put up to 20% of revenue at risk, while Ark Invest bought US$5.2 million of Circle stock and sold US$15.9 million of its own bitcoin ETF.
Moody's assigned Ripple's RLUSD an investment-grade rating, posing direct competition to Circle's USDC.
The CFTC sued Utah, escalating the federal-state conflict over prediction market oversight and directly affecting the prediction market businesses of companies such as Robinhood.
On accounting rules, FASB ASU 2023-08 requires qualifying crypto assets to be measured at fair value, but the DVLT case shows that "whether it can be recognized" precedes "how to measure it," because a lack of custody control can prevent assets from being put on the books at all.
Geopolitical Risks and the Road Ahead
On geopolitical risk and the outlook, tensions over Iran continue.
The conflict has lasted eight months; on October 22, Iran said seven tankers were damaged in the Strait of Hormuz and threatened to attack oil and AI infrastructure if the U.S. and Israel resumed strikes.
On October 28, media reports said the U.S. asked Gulf states to prepare for "resuming strikes on Iran after the midterm elections," while Trump said on October 26 that he was weighing "reaching a deal" against "a complete resolution."
UBS data showed Russian crude exports were only 10% below pre-war levels, Brent crude held in the US$110-115 range, and the energy sector ETF (XLE) rose 0.35%.
The midterm elections are scheduled for November 3, and control of Congress will directly affect energy and crypto regulatory paths.
Core PCE (expected 3.1%) and preliminary GDP (expected 3.2%) will be released on October 29; if the data come in high, the 10-year yield could rise further, creating a second round of pressure on tech stocks and crypto assets.
Eli Lilly, Mastercard, Amazon, Intel, Strategy, and Coinbase are among companies due to report after the close on October 29, while Exxon Mobil, Chevron, and AbbVie report before the open on October 30.
Warsh announced that starting in 2027, one of eight annual meetings will be devoted to macro strategy with no vote on rates, rising to two in 2028, and STRC daily dividends take effect from November 1.
If the sharp declines in NOW and FTNT are confirmed the next day, they will drag down the entire SaaS sector.
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