After experiencing a sharp drop last Friday, the NASDAQ index in the US stock market experienced its largest weekly decline in nearly a year and a half, which has also raised concerns in the market about the future upward trend of US technology stocks.
However, the financial reports of several large technology companies will be released this week, which may be a crucial moment for investors to determine the direction of future technology stock trends.
Four of the "Seven Giants" will all release financial reports
Among the 500 constituent companies in the S&P 500 index, approximately 178 will announce their results this week, accounting for over 40% of the total market value of the index. Of course, the market is most concerned about technology companies with huge market capitalization. Four of the "Big Seven" companies - Microsoft, Meta, Google's parent company Alphabet Inc., and Tesla - will all release their financial reports.
Last week, with the sell-off of US technology stocks, the Nasdaq index hit its largest weekly decline since November 2022. Even Nvidia, the darling of AI, was not spared. Its share price plummeted by 10% last Friday and its market value evaporated by $212 billion, the biggest one-day decline since the COVID-19 in March 2020.
But hope is emerging.
According to think tank data, it is expected that the profits of the "Big Seven" (including Apple, Amazon, and Nvidia) will increase by 38% year-on-year in the first quarter of this year, far higher than the expected 2.4% year-on-year growth of the S&P 500 index as a whole.
The problem is that Nvidia, which Goldman Sachs calls "the most important stock on Earth," is not included in the team that released its financial report this week. It will take another month for the report to be released, and the market's expectations for Nvidia's financial report are not optimistic, with the company's net revenue growth rate expected to drop to 23%.
Anthony Saglimbene, Chief Market Strategist at Ameriprise Financial, said, "Nvidia is actually a company that has performed better than expected, but in the technology industry as a whole, especially companies related to artificial intelligence themes, investors have become more picky in terms of profits. Investors want to see the real growth brought by artificial intelligence in the enterprise, or at least they have a reliable plan to achieve growth through artificial intelligence."
Hope or disappointment?
This suspicion is infiltrating the prices of the world's largest technology stocks. Since the Nasdaq 100 index peaked last month, their value has evaporated by over $930 billion so far, as traders have increased their bets that the Federal Reserve will postpone interest rate cuts.
After the US stock market closes on Tuesday, Tesla will release its financial report, and investors will see the first glimmer of hope. Meta will release its report on Wednesday Eastern Time, while Microsoft and Alphabet will release their report on Thursday. Apple and Amazon will release their financial reports next week. And the most important financial report - NVIDIA's financial report will only be finally unveiled on May 22nd.
Among the companies that released their financial reports this week, Meta is clearly one of the best. Driven by the AI craze, Meta's stock price has risen by about 36% so far this year, while Alphabet's increase is about 10%, Microsoft's is 6%, and Tesla's has fallen by nearly 41%. Meta expects revenue to grow by 26% this quarter, with net profit almost double that of the same period last year. It has been heavily investing in artificial intelligence to improve advertising positioning and recommend content to its vast user base.
Microsoft is also expected to benefit from artificial intelligence, as it has applied its Copilot AI assistant to its products, including Office and GitHub encoding platforms. Last quarter, the demand for artificial intelligence products drove the growth of its key Azure cloud services business, and it is expected that the company's revenue and revenue will both increase by more than 15% this time.
"There is reason to be optimistic that due to artificial intelligence, Microsoft's growth rate may be higher than normal. It has already achieved higher growth," said Michael Neill, senior investment analyst at UBS Asset Management
On the other hand, Alphabet's artificial intelligence program is facing questioning. In addition, the integration of artificial intelligence with other search engines such as Bing has put Google on the defensive. The market currently expects the company's net profit to increase by over 30% and revenue to grow by nearly 14% in the first quarter, reflecting the persistence of growth momentum for large technology companies. However, both of the company's previous reports have caused large-scale sell-offs, and if this financial report disappoints again, it will further undermine market confidence in its prospects.
Daniel Skelly, Head of Market Research and Strategy at Morgan Stanley Wealth Management, said, "Cloud computing has recovered and the online advertising cycle has begun, which will benefit from major political events later this year and advertising before the Olympics. Of course, most importantly, you have artificial intelligence. It's hard to deny that the momentum of the technology industry is still continuing."
If the "Big Seven" are excluded, the profits of other constituent companies in the S&P 500 index are expected to shrink by 3.9%. But Wall Street expects that this trend will reverse over time. BI data shows that by the first quarter of 2025, these seven companies are expected to achieve a profit growth of 17.5%, while the profit growth of other S&P 500 index constituent companies is close to 18%.