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Futures down: Dow 0.59%, S&P 500 0.86%, Nasdaq 1.12%

Oct 31 (Reuters) - Wall Street futures fell sharply on

Thursday, as warnings from Meta Platforms ( META ) and Microsoft ( MSFT ) about

rising artificial intelligence-related costs dampened optimism

around megacaps, which have been the market's primary driver

this year.

Shares of Facebook-owner slumped 4%, while

Microsoft ( MSFT ) dropped 3.7% in premarket trading. Both

companies beat earnings estimates in results reported after the

bell on Wednesday.

Markets were on edge ahead of the release of the Personal

Consumption Expenditures index, the U.S. Federal Reserve's

preferred inflation metric, for insight on how much the central

bank could ease borrowing costs in the last two months of 2024.

Nonfarm payrolls data is also due on Friday.

Meta warned of "significant acceleration" in AI

infrastructure investments and Microsoft ( MSFT ) predicted slower growth

in its Azure cloud business, signaling that the company's

already hefty AI investments were not enough to keep pace with

capacity constraints.

Though betting on AI-driven tech stocks propelled Wall

Street to record highs this year, investor exuberance has meant

stocks are trading at incredibly expensive valuations. Meta and

Microsoft's ( MSFT ) warnings point to the challenges companies face in

pleasing investors.

"The market is unforgiving of any AI-related company that

fails to significantly outperform. Meta is the latest stock to

feel the wrath of investors, despite extending its track record

of doing better than analyst forecasts on key financial

measures," said Dan Coatsworth, investment analyst at AJ Bell.

The other so-called Magnificent Seven megacap stocks fell,

with Nvidia ( NVDA ) losing 1.5% and Alphabet down

1.1%, giving up some gains after soaring in the previous session

following upbeat results.

Amazon.com ( AMZN ) lost 1.3% and Apple ( AAPL ) dipped 0.3%

ahead of quarterly results from both, due after market close.

At 5:08 a.m. ET, Dow E-minis were down 251 points,

or 0.59%, S&P 500 E-minis were down 50.25 points, or

0.86% and Nasdaq 100 E-minis were down 229 points, or

1.12%.

The VIX, Wall Street's "fear gauge", rose to a more

than three-week high as investors brace for more volatility from

corporate results, the upcoming U.S. presidential election and

the central bank's November meeting in the next few weeks.

Ecommerce firm eBay ( EBAY ) fell 9% following downbeat

revenue forecasts, while trading platform Robinhood

slumped 10.3% after its third-quarter earnings missed

expectations.

Monolithic Power Systems ( MPWR ) dropped 9.7% after

results, with other chip firms also sliding after a set of dour

forecasts weighed on the sector's outlook.

Earnings from companies including Uber Technologies ( UBER )

, Mastercard ( MA ), Bristol-Meyers Squibb and

ConocoPhillips ( COP ) are due before markets open.