A sign outside the Nasdaq Marketsite on March 23, 2023 in New York.
Stephanie Keith | Bloomberg | Getty Images
With quarterly earnings reports for major tech companies nearly over, one thing is clear: Wall Street is nervous.
The Nasdaq Composite Index fell 3.4% this week, bringing its three-week decline to 8.8%, according to FactSet, the tech-heavy index’s worst performance in that period and its first since September 2022, when rising inflation and interest rates caused the market to crash.
Since the end of 2022, the narrative has been largely positive for the technology sector, with the U.S. economy recovering after the pandemic and growing expectations around growth opportunities driven by artificial intelligence.
The Nasdaq soared 43% last year and hit a record high last month, after which it is up 12% so far this year.
But the past earnings season was disappointing, with some companies noting slower-than-expected growth, while others expressed concern that their AI infrastructure buildout may face some setbacks.
Hanging over the industry are concerns about the overall U.S. economy. The Labor Department said Friday that job growth slowed more than expected in July and the unemployment rate rose. Economic data the previous day showed an unexpected rise in jobless claims and weakening manufacturing.
Josh Coren, founder of Musketeer Capital Partners, said tech giants with market capitalizations of more than $1 trillion are so big that any weakness in overall data will naturally show up in their financial results, which increases the macroeconomic factor.
Amazon and apple Both companies reported earnings on Thursday, with Amazon issuing a disappointing outlook and lower-than-expected sales, and Apple reporting sales growth of just 5%.
“As the economy slows, companies like Amazon and Apple are going to slow down,” Coren said on CNBC’s “Squawk Box Europe” on Friday. “And you’re seeing that in their earnings.”
Amazon shares plunged 8.8% on Friday, bringing their three-week decline to 14%. On the earnings call, executives said part of the sales decline was due to consumers buying cheaper household goods and fewer big-ticket items like computers and TVs.
“We continue to see many of the consumer trends we’ve been talking about since last year, as consumers become more cautious with their spending and turn to lower-priced products,” Amazon Chief Financial Officer Brian Olsavsky said on a conference call. “We’re seeing signs that this trend will continue into the third quarter.”
Apple’s results were less worrying — the company beat expectations on profit and revenue, and its shares ended slightly higher on Friday and this week — but that was after a drop of more than 5% over the past two weeks.
Microsoft It’s down 4% this week and 10% over the past three weeks. The tech giant reported weaker-than-expected results for the current quarter and shelved growth for its Azure cloud division. Mizuho analysts wrote in a note after the report that Azure’s “core consumption was impacted by capacity constraints and weakness in certain European regions.”
of stocks alphabet That’s down slightly this week after a 10% decline over the past two weeks. The company reported earnings that showed YouTube ad revenue fell short of expectations and overall advertising growth was just 11%, well below rivals. Metaincreased by 22%.
Meta is the exception
Meta has stood out among the group, with its shares up almost 5% this week. The company beat Wall Street expectations and issued an optimistic outlook for the current quarter, and CEO Mark Zuckerberg said the company’s big investments in AI are paying off by making ads more relevant and making it easier for marketers to create campaigns.
“We think there’s huge benefits there, from improving recommendations, making it easier for people to find better content, making the advertising experience more effective,” Zuckerberg said during an earnings call last month. “These are already big-scale products. The AI work that we’re doing will make them even better.”
However, even after that rally, Meta has fallen over the past three weeks.
The only big tech company that has yet to report results is Nvidia, which has been the biggest winner of the AI boom: Its shares are down 17% in the Nasdaq’s three-week selloff but are still up more than 110% this year.
Nvidia is banking on investments from big tech companies as it builds out its AI infrastructure. Any signs of a pullback in Nvidia’s stock price could have a big impact on the stock, as the company has been on a meteoric rise over the past few years. The company is scheduled to report earnings on Aug. 28.
Behind the Scenes of the Semiconductor Market Intel.
Once the world’s largest chipmaker, Intel has been heavily outdone by rivals in recent years and is falling far behind in the race to develop AI. The company’s shares suffered their worst day in 50 years on Friday, plummeting 26% to their lowest level since 2013.
Intel reported big profit misses and announced a major restructuring that will cut 15% of its workforce. CEO Pat Gelsinger told CNBC on Friday that it’s “Intel’s biggest restructuring since the memory-to-microprocessor transition 40 years ago.” Investors aren’t sure it will work.
Analysts at KeyBanc Capital Markets said in a Friday note that the outlook was tough and they maintained a hold recommendation on the stock while lowering their forecasts.
“Given all of the challenges facing INTC, such drastic cuts to staffing would likely make it even more difficult to achieve its goals,” they wrote.
