Big Tech sheds $200 billion in value as earnings disappoint this year

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The so-called Magnificent Seven technology companies that have powered this year’s US stock rally are posting disappointing earnings, wiping $200 billion off their market value and threatening to push the S&P 500 into a correction. Google owner Alphabet, Tesla and Facebook parent Meta Platforms have all slumped since reporting, with Microsoft the only bright spot. Amazon.com  publishes results after the close Thursday, and the options market is implying a one-day move for the stock of 8.1 per cent in either direction — putting about $100 billion in market value in play. 

 


The remaining two — Apple and Nvidia — are due to report next month. 




The seven companies have been the story of the year in the stock market, with a frenzy of interest around artificial intelligence fuelling gains for many of them. The optimism is waning because of higher interest rates and war in the West Asia — the S&P 500 has fallen 8.8 per cent from its 2023 peak, putting it within reach of the 10 per cent drop that’s defined as a correction in a bull market.




Yet there’s still plenty of euphoria left. The tech-heavy Nasdaq 100 Index, dominated by the Magnificent Seven, remains up 31 per cent for year, meaning there’s plenty of room for the market to fall.  

 


Meta’s results are going to weigh on the market when trading opens Thursday. The stock fell 2.4 per cent in premarket trading after the social media giant dashed investors’ hopes for a long-term advertising recovery, saying it was at the whim of an uncertain economic environment.




This comes on the heels of Alphabet erasing almost $180 billion in market value on Wednesday after the company’s Cloud unit reported a smaller-than-expected profit. The loss was the biggest single-session market value wipeout for the search giant. Earlier in the month, Tesla’s value shrank by $72 billion in one day after its results. 




For now, the only glimmer of hope among the big seven is Microsoft. The Windows software maker rallied to add about $75 billion in market value on Wednesday, after the software giant reported first-quarter results that beat expectations. Alphabet and Microsoft, which both trail Amazon in Cloud infrastructure, have been racing to build up their AI offerings as a way to make their platforms more enticing to customers. Their diverging sets of results raise the bar for Cloud computing leader Amazon when it reports earnings on Thursday.

First Published: Oct 26 2023 | 11:58 PM IST

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