📈 Big Tech’s Fright Night

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Good Morning!

Big Tech had a spooky Halloween 🎃, with stocks slipping despite solid earnings across the board. Wall Street seems to want concrete proof that these massive AI investments will pay off.

Grab your Iced latte and let's get into it! ☕️👇️

Markets

📈 S&P 500 Wipes Out October Gains
October turned out to be a rough month for U.S. stocks, with the S&P 500 erasing its gains after dropping 1.9% yesterday, its steepest single-day drop in almost two months. Investors were spooked by lukewarm tech earnings, breaking the index’s five-month winning streak and marking a 29-day run without a 1% drop.

🤖 Markets led lower by tech
Yesterday, The Nasdaq Composite, loaded with tech giants, took the hardest hit, tumbling 2.8% and wrapping up the month down by 0.5%. Whilst Alphabet shares jumped nearly 3% on Wednesday thanks to robust revenue growth, chipmaker AMD tanked over 10% after issuing a lackluster fourth-quarter forecast. The week has been packed with tech earnings reports.

🚲️ Peloton stock pops as it names new CEO
Peloton Interactive (PTON) has tapped Ford executive Peter Stern as its new CEO, set to take the reins in January 2025. Stern, who joined Ford in 2023 and served as president of Ford Integrated Services, brings fresh leadership to the popular fitness brand. Peloton shares surged 27.8% in pre-market trading on the news.

📉 Microsoft Stock Slides 5.6% In October, is it a buy?
Microsoft (MSFT) started September on shaky ground but managed to bounce back with a 3% gain for the month. October also seemed solid, with steady growth, that was until yesterday with shares plummeting 6% and ending the month down 5.6%, wiping out those September gains too. So, is Microsoft a buy at these levels, or is it time for investors to think about selling?

🍎 Apple Posts 6% Sales Growth, The stock fell anyway
Apple posted a 5.5% increase in iPhone sales and rising revenue, but it wasn’t enough to spark investor excitement. Shares slid as the latest earnings report fell short of expectations, particularly in its forward guidance, which left investors unimpressed.

Markets wary over Big Tech AI spending

This earnings season, Silicon Valley is facing a “show me the money” moment. Wall Street’s patience with sky-high AI spending is running out, deepening Thursday’s tech stock selloff. Microsoft plunged 6%, Meta dropped 4%, and after-hours trading saw Amazon and Apple dip over 3% and 2%, respectively, despite all four giants reporting strong quarterly profits.

Nearly two years since ChatGPT ignited the AI frenzy, tech’s AI investment boom is showing both big rewards and daunting costs. Gains were there:

• Meta’s ad prices up 11%

• Google Cloud revenue up 35% to $11.4 billion

• Amazon’s AWS growing 19% to $27.5 billion.

But the staggering spending tempered excitement.

Meta’s 2024 capital expenditure forecast? Up to $40 billion. Microsoft warned of OpenAI-related losses and slowing cloud growth. Apple, cautiously entering AI with its “Apple Intelligence,” also saw investor unease, even with record $94.9 billion in revenue.

“It’s costly to run AI,” says GlobalData analyst Beatriz Valle. Building capacity is expensive, and widespread adoption will take time. Amazon CEO Andy Jassy called AI a “once-in-a-lifetime” opportunity, but for now, the market is wary. Silicon Valley may have to prove AI can be profitable, not just powerful.

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