A DISAPPOINTING earnings report from Meta Platforms has technology investors on edge ahead of results from some of the stock market’s biggest and most important companies in the coming days.
Technology stocks tumbled on Thursday (Apr 25) with the tech-heavy Nasdaq 100 Index falling as much as 2 per cent after Meta forecast weaker-than-expected sales in the current quarter while targeting higher capital expenditures. The sell-off wiped out roughly US$400 billion in market value from the benchmark at the low.
Meta slumped as much as 16 per cent. Alphabet and Microsoft, which both report earnings on Thursday afternoon, dropped more than 5 per cent. Amazon.com, whose results are due on Apr 30, fell nearly 6 per cent.
Before its earnings, Meta shares had rallied this year amid heavy spending on artificial intelligence (AI) – and investors had been looking for use of the technology to boost results. Instead, the disappointing revenue forecast raised questions about returns on those investments and whether expectations for other Big Tech peers are too high.
“The disappointment on the revenue side is overshadowing any optimism about AI,” said Jack Ablin, chief investment officer at Cresset Wealth Advisors. “It’s hard to tell what the benefit will be to users, and while AI could ultimately mean some cost savings down the line, that isn’t visible yet.”
For analysts at Lynx Equity Strategies, Meta’s results raised broader questions about the AI trade.
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“For all of this attention on AI, why is not the company able to beat June expectations,” analysts KC Rajkumar and Jahanara Ahmed said. “Is the monetisation of gen AI on track with management’s expectations?”
Elsewhere in technology, International Business Machines and software maker ServiceNow added to the gloom as their shares slumped after their own earnings reports.
With the losses on Thursday, Meta has erased more than US$170 billion in market capitalisation. Yet some analysts and investors see this as a buying opportunity.
“It’s a weakness that’s interesting to take advantage of,” Fares Hendi, portfolio manager at SG Prevoir said, adding that Meta was on his fund’s watch list. “Potentially, it’s a fall which can create interesting entry points.” BLOOMBERG
