A sign outside the Nasdaq MarketSite on March 23, 2023 in New York.
Stephanie Keith | Bloomberg | Getty Images
With the tech giants’ second-quarter profits largely in the past, one thing is clear: Wall Street is nervous.
The Nasdaq fell 3.4% this week, bringing its three-week decline to 8.8%. It was the tech index’s worst performance during that stretch since September 2022, when the market plummeted on soaring inflation and rising interest rates.
Since the end of 2022, the narrative in the tech world has been mostly positive, with the economy recovering and growth opportunities spurred by artificial intelligence exciting. The Nasdaq soared 43% last year and is still on track to rise 12% in 2024 after climbing to a record last month.
But earnings season has been difficult, with some companies pointing to weaker-than-expected growth and some worrying that building out artificial intelligence infrastructure may hit some hurdles. Hovering over the entire industry is economics. U.S. job growth slowed far more than expected in July, the Labor Department said on Friday, while the unemployment rate rose a day after economic data showed an unexpected increase in jobless claims and weakness in the manufacturing sector.
Josh Koren, founder of Musketeer Capital Partners, said that technology giants with valuations exceeding trillions of dollars are increasingly part of the macro economy because they are so large that weakness in overall data will naturally show up in their performance. Amazon and apple Both companies reported earnings on Thursday, with Amazon’s revenue missing expectations and a disappointing forecast, while Apple’s revenue growth was only 5%.
“As the economy slows down, businesses like Amazon, Apple, etc. will slow down,” Coren told CNBC’s “Squawk Box Europe” on Friday. “That’s what you’re seeing in earnings.”
Amazon tumbled 8.8% on Friday, bringing its three-week decline to 14%. Executives on the earnings call blamed part of the revenue shortfall on consumers buying cheaper household goods and fewer big-ticket items like computers and televisions.
“We’re seeing a lot of the same consumer trends that we’ve been talking about last year, which is consumers being cautious and spending less,” Amazon Finance Chief Brian Olsavsky said on the call. We see signs of that continuing in the third quarter.”
Apple’s results were less worrisome — the company beat earnings and revenue estimates — and the stock ended slightly higher on Friday and for the week. But that comes after falling more than 5% in the previous two weeks.
Microsoft It is down 4% this week and 10% over the past three weeks. The software company issued a lower-than-expected forecast for the current quarter and failed to achieve growth in its Azure cloud business. Azure’s “core consumption has been impacted by capacity constraints and weakness in certain European regions,” Mizuho analysts wrote in a note following the report.
shares letter The slight decline this week follows a 10% drop two weeks ago. In last week’s financial report, YouTube’s advertising revenue fell short of expectations, and the company’s overall advertising growth of 11% was far lower than its competitors. Yuanexpanded by 22%.
Yuan is an exception
Meta, the leader of the group, beat Wall Street expectations and issued an upbeat forecast for the quarter, sending its shares up nearly 5% this week. Chief Executive Mark Zuckerberg said the company’s heavy investment in artificial intelligence is now paying off, allowing it to create more relevant ads and make it easier for marketers to create campaigns.
“I think there’s a lot of benefit in the way it improves recommendations, helps people find better content and makes the ad experience more effective,” Zuckerberg said on the earnings call. “These are products that are already at scale. We’re working on it Artificial intelligence work will improve this.”
Even after the rebound, Meta has continued to fall over the past three weeks.
Nvidia, the only major technology company that has yet to report results, is the biggest winner in the artificial intelligence boom. The stock is down 17% from the Nasdaq’s three-week plunge, but is still up more than 110% for the year.
Nvidia relies on spending by top tech peers to build out its artificial intelligence infrastructure. Because of Nvidia’s parabolic rise over the past few years, any signs of a potential decline could have a huge impact on its stock. The company is scheduled to announce results on August 28.
The other side of the semiconductor market is Intel.
Intel, once the world’s largest chipmaker, has been beaten by rivals in recent years and has fallen far behind in the artificial intelligence race. The stock had its worst day in 50 years on Friday, plunging 26% to its highest level since 2013.
Intel reported a sharp decline in profits and announced a massive restructuring that included cutting 15% of its workforce. CEO Pat Gelsinger told CNBC on Friday that this is “Intel’s largest restructuring since the transition to memory microprocessors forty years ago.” Investors weren’t convinced it would work.
In a note on Friday, analysts at KeyBanc Capital Markets lowered their forecasts for the stock and maintained a hold recommendation on the stock, citing a difficult road ahead.
“Given all of the challenges facing INTC, layoffs of this magnitude may make it more difficult to achieve its goals,” they wrote.
watch: Bernstein analyst says he thinks Intel will weather the storm
