Microsoft Corp. (NASDAQ: MSFT), Alphabet Inc. (NASDAQ: GOOGL), and Advanced Micro Devices Inc. (NASDAQ: AMD) have reported their quarterly earnings, causing a major drop in the stock market value of AI-related companies. This decline wiped out a staggering $190 billion, highlighting the high expectations investors had following a recent AI-driven stock market rally that had propelled these companies’ shares to record highs.
Alphabet’s stock fell by 5.6% after its fourth-quarter ad revenue failed to meet expectations. The company also announced a significant increase in spending on data centers to support its AI plans, indicating the costs of its competition with AI rival Microsoft.
Despite beating analyst estimates for quarterly revenue, Microsoft’s stock dropped by 0.7% in extended trade. Earlier in the day, the stock had reached an intra-day record high, driven by optimism about AI, pushing Microsoft’s market value above $3 trillion, surpassing Apple Inc. (NASDAQ: AAPL).
AMD saw a 6% drop in its stock after its first-quarter revenue forecast missed estimates, despite projecting strong sales for its AI processors. This trend also affected other AI-related companies, such as Nvidia Corp. (NASDAQ: NVDA) and server maker Super Micro Computer.
This decline in AI-related stocks is in stark contrast to the market’s performance earlier in January when tech stocks, especially AI companies, were driving the S&P 500 index towards a new record high.
Jim Cramer, the host of CNBC’s Mad Money, advised investors to withhold making major decisions in response to the recent market turbulence, pointing out the presence of too much noise after the stumble of tech stocks.
In conclusion, the quarterly earnings reports of Microsoft, Alphabet, and AMD have caused a significant drop in the stock market value of AI-related companies. The decline highlights investors’ high expectations following a previous AI-driven stock market rally. It remains to be seen how these companies will regain the trust of investors and navigate the challenges ahead in the AI industry.
References:
1. https://www.reuters.com/technology/ai-stocks-plunge-190-bln-after-microsoft-alphabet-earnings-2022-01-26/
2. https://www.benzinga.com/markets/22/01/24587296/ai-dream-turns-nightmarish-190b-wiped-out-after-msft-googl-amd-earnings
