The earnings season for US tech giants kicks off with insufficient "firepower." Is the "AI boom" expectation overhyped or is it a technical profit-taking adjustment?

Zhitong
2024.11.01 03:01
portai
I'm PortAI, I can summarize articles.

The earnings season for U.S. tech giants has started poorly, with companies like Microsoft, Meta, and Apple reporting better-than-expected earnings, but their stock prices fell due to conservative future forecasts. The Nasdaq and S&P 500 indices recorded their largest single-day declines since September. Nevertheless, some analysts remain optimistic about the long-term performance of large tech stocks, believing that the continued growth in artificial intelligence-related spending will support the market

According to the Zhitong Finance APP, investors' expectations for large U.S. technology companies are so high that exceeding expectations is no longer sufficient. The financial report released on Wednesday showed that Microsoft (MSFT.US) had better-than-expected revenue and earnings per share for the first fiscal quarter, with net profit significantly increasing compared to the same period last year. However, Microsoft’s stock fell 6.1% on Thursday due to the company's conservative forecast for the second fiscal quarter, leading to its worst day since October 26, 2022.

Meta (META.US) and Apple (AAPL.US) experienced similar stock price movements, and even Alphabet (GOOGL.US) saw its stock price drop 1.9% on Thursday, despite a nearly 3% increase after its earnings report on Wednesday.

Ross Mayfield, an investment strategist at Baird Private Wealth Management, stated, "I think we have reached a point where the enthusiasm and potential for artificial intelligence are not enough. These companies have not fully realized the growth that the market expected."

The poor performance of large tech stocks dragged the Nasdaq index down 2.76% on Thursday, while the S&P 500 index, which is heavily weighted by these large tech stocks, fell 1.86%. Both indices recorded their largest single-day declines since September 3.

However, some analysts remain optimistic about large tech stocks driving the U.S. stock market higher. Solita Marcelli, Chief Investment Officer for the Americas at UBS Global Wealth Management, stated, "The continued growth in AI-related capital expenditures reported by the three tech giants, Microsoft, Alphabet, and Meta, supports positive structural trends." Craig Johnson, Chief Market Technician at Piper Sandler, believes, "Overall technical evidence remains constructive, and the primary trend for major indices is upward, even with recent pullbacks or slight profit-taking."

This places a tremendous burden on large tech companies. Investors and analysts not only expect these companies to exceed performance expectations but also hope they can drive the stock market higher, which depends more on growth prospects than on performance. Essentially, large tech companies need to meet investors' expectations for both the past and the future more than any other industry

Source: Zhitong The copyright of this article belongs to the original author/organization.
The views expressed herein are solely those of the author and do not reflect the stance of the platform. The content is intended for investment reference purposes only and shall not be considered as investment advice. Please contact us if you have any questions or suggestions regarding the content services provided by the platform.