Big tech companies lost nearly $1 trillion in brutal earnings week – 10/28/2022 – The market

Nearly $1 trillion was wiped off the value of America’s biggest tech companies this week, with previous gains halted by a slowing global economy and rising cost pressures.

Stock losses accelerated Thursday night after Amazon shocked Wall Street with a poor revenue forecast for its all-important fourth quarter of the year, when holiday shopping typically boosts its earnings. The US e-commerce company indicated that revenue for the period would likely be $15 billion less than the $155 billion that analysts had predicted.

The news extended a surprisingly weak earnings season for major U.S. digital groups, ending a wave of growth during the coronavirus pandemic and dashing hopes of overcoming inflation and weakening growth hitting the broader economy.

The biggest stock market loser was Microsoft, with $243 billion off its market capitalization in late trading on Thursday after it signaled earlier in the week that growth in its cloud computing business was slowing faster than expected. The news raised fears that some of the businesses considered the most resilient to the crisis, including cloud computing and Google’s search advertising, were beginning to suffer.

Amazon’s pessimistic forecast spread the problem to the e-commerce sector and cut more than $200 billion from the market value of the company’s shares. Only Apple managed to weather the surprise, late Thursday with news of earnings and profits that beat analysts’ expectations, although its shares fell slightly as investors nervously awaited a financial forecast later in the day.

Facebook parent Meta dealt one of the biggest blows to Wall Street’s faith in Big Tech’s resilience on Wednesday night when it reported falling profit margins due to shrinking ad revenue and rising costs.

Mark Zuckerberg faced a barrage of questions from Wall Street analysts about why his company plans to double down on artificial intelligence and the metaverse next year, despite an erosion in the advertising business and a lack of clear promises about when the massive spending will pay off.

Echoing the cautious sentiment at the end of the troubled earnings report, Brent Thill, an analyst at Jefferies, said: “There are too many experimental bets versus proven bets at the core.”

In a note to investors, Morgan Stanley analysts added that they were breaking their usual practice of not announcing immediate downgrades in response to bad news because Meta’s spending plans were a moment for a “change in thesis.”

Wall Street’s loss of confidence in the evolution of Zuckerberg’s idea of ​​a metaverse wiped out 24.6% of Meta’s shares on Thursday in New York, reducing the market value of its shares by $84.6 billion. That left Meta shares 74% below a record they hit 14 months ago and extended a two-day slide in tech majors that began on Tuesday with weak profits at Alphabet, Google’s parent company.

Fears that the tech giant is doing too little to rein in its skyrocketing costs were fueled when Alphabet said it had hired nearly 13,000 new employees in the past three months alone, one of its biggest hires ever, despite recent internal communications from CEO Sundar. Pichai, in order for the company to be more “focused” on its spending.

Like Meta, Google also said its massive capital investment will continue, intensifying the race of the biggest tech companies to meet the growing demands of artificial intelligence.

All told, Alphabet, Amazon, Apple, Meta and Microsoft lost $566 billion in market value Thursday morning, but the decline accelerated later in the day as Amazon’s earnings forecast hit an already jittery Wall Street, bringing total losses to $954 billion. The decline left five companies with a combined value of $6.25 trillion.

Leave a Reply

Your email address will not be published. Required fields are marked *