Serrari Group

On Tuesday, AI-related companies witnessed a staggering loss of $190 billion in stock market value, triggered by lackluster quarterly performances from industry leaders Microsoft (MSFT.O), Alphabet (GOOGL.O), and Advanced Micro Devices (AMD.O). The underwhelming results failed to meet the high expectations of investors who had previously driven these stocks to record highs during a recent AI-driven market rally.

The sell-off that ensued after the post-market release of the tech giants’ quarterly reports highlighted the heightened expectations investors had developed amid the surge in AI-related stock prices in recent months, with promises of widespread technology integration in the corporate landscape.

Alphabet experienced a 5.6% decline as the parent company of Google fell short of expectations in ad revenue for the December quarter. Additionally, Alphabet announced a substantial increase in spending on data centers to support its AI initiatives, shedding light on the competitive costs of its rivalry with AI counterpart Microsoft.

Although Google Cloud’s revenue growth slightly surpassed Wall Street targets, driven by a growing interest in AI, Microsoft’s Azure exhibited even faster growth. Microsoft managed to exceed analyst estimates for quarterly revenue, with new AI features attracting customers to its cloud and Windows services. However, the positive news did not prevent a 0.7% decline in Microsoft’s stock during extended trade, following a brief intra-day record high earlier in the day.

The optimism surrounding AI had propelled Microsoft’s market value above $3 trillion earlier this month, surpassing Apple (AAPL.O). Chipmaker Advanced Micro faced a 6% tumble as its forecast for first-quarter revenue failed to meet estimates, despite strong projections for AI processor sales. The company’s stock, which had surged 27% in January after more than tripling last year on AI optimism, experienced a more than 2% decline in extended trade.

Super Micro Computer, a server maker benefitting from increased demand related to AI, also faced a drop of over 3%. Despite reaching a record high earlier on Tuesday after delivering impressive quarterly results, the company couldn’t escape the market downturn in extended trade.

By: Delino Gayweh
Serrari Financial Analyst
February 2, 2024

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