* Futures up: Dow 0.4%, S&P 500 0.62%, Nasdaq 1.34%

* Microsoft ( MSFT ) jumps after forecasting upbeat sales, cloud

growth

* Meta drops after second-quarter free cash flow plunges 91%

* Traders see 63% chance of 25-bps Fed rate hike in

September

(Updates prices throughout; adds analyst comment)

By Sruthi Shankar and Ragini Mathur

July 30 (Reuters) - U.S. stock index futures rose on

Thursday after a sharp selloff driven by uncertainty around the

Federal Reserve's policy outlook, while Microsoft's ( MSFT )

forecast-beating results soothed investor concerns about massive

AI spending by companies.

Microsoft ( MSFT ) rose 9% in premarket trading after the

company forecast current-quarter sales and cloud growth that

beat expectations, gave a capital expenditure outlook below Wall

Street estimates and said it expects to keep generating cash

through its just-started fiscal 2027.

Investors have been spooked by rising AI costs at big

technology firms even as they report strong earnings. Negative

cash-flow reports from Alphabet and Tesla

last week sparked a bout of selling in AI-linked stocks, with

chip stocks also coming under pressure as investors question

high valuations. The tech-heavy Nasdaq dropped 10% from

its early June peak on Wednesday.

In a sign that AI concerns were far from over, Meta

Platforms ( META ) dropped 8.5% after the social media giant

reported a 91% drop in second-quarter free cash flow,

underscoring the financial strain of its costly AI buildout.

Apple ( AAPL ) and Amazon ( AMZN ) are scheduled to report

earnings after markets close on Thursday.

U.S. stocks fell sharply on Wednesday, with the benchmark S&P

500 posting its biggest percentage drop since June 10,

after the Fed left interest rates unchanged in the 3.50%-3.75%

range, but mixed messages from new Fed Chair Kevin Warsh left

traders confused about the path of borrowing costs.

"Despite the divided vote, there was nothing really in

Warsh's remarks that made it clear that a September hike was in

the offing," said Matthew Ryan, head of market strategy at

Ebury.

Bond markets, however, were on edge, with the yield on the

30-year Treasury bond surging to its highest level

in 19 years, as investors grew increasingly concerned about the

central bank's monetary-policy outlook and sought greater

protection against future inflation.

Traders currently see a 63% chance that the U.S. central

bank will raise interest rates by 25 basis points at its

September meeting, as per CME Group's FedWatch tool.

Key economic data, including the preliminary reading of

second-quarter GDP, personal consumption expenditures for June

and weekly initial jobless claims, are due at 8:30 a.m. ET.

At 7:26 a.m. ET, Dow E-minis were up 209 points, or

0.4%, and S&P 500 E-minis were up 45.5 points, or 0.62%.

Nasdaq 100 E-minis were up 365.5 points, or 1.34%.

Among other stocks, Qualcomm ( QCOM ) fell 4.2%, as the

chipmaker forecast fourth-quarter profit below estimates and

said revenue from Apple ( AAPL ) products would decline faster than

expected.

Cybersecurity firm Fortinet ( FTNT ) gained 11.3% after

lifting its annual revenue forecast, signaling strong enterprise

spending on its services amid rising data security incidents.

Starbucks ( SBUX ) climbed 6.5% after the world's largest

coffee chain raised its annual sales and profit forecasts.

Nearly half of S&P 500 companies have reported

second-quarter results so far. Of those, 85.2% have topped

analysts' profit estimates, as per LSEG IBES data, compared with

an average beat rate of 68%.