Tech giants face a mound of turmoil as they prepare to report results this week.
Protests and reorganisations have occurred at Google, and Tesla recently revealed massive layoffs, price reductions, and a Cybertruck recall. Microsoft's OpenAI partnership is under increased scrutiny, and Meta, the parent company of Facebook, had a rough go of it last week when it rolled out its new AI assistant.
The alarming announcement coincides with a generative AI gold rush, as major tech companies scramble to incorporate the new technology into their extensive product and feature portfolios in order to stay competitive in a sector expected to reach $1 trillion in sales in less than ten years.
Because of Wall Street's obvious trepidation over the impending outcome, the tech-heavy Nasdaq Composite saw its worst weekly decline since November 2022 last week, falling 5.5%. Leading the decline was Nvidia, which has become a darling in AI, which fell 14%.
“Whether this tech sell-off continues, I think really depends on how the mega-cap tech reports,” said King Lip, chief strategist at BakerAvenue Wealth Management, in an interview with CNBC. “Valuations have definitely been more reasonable now, now that we’ve had a little bit of a correction.”
According to Lip, his company has "trimmed some of our tech exposure" during the past few weeks.
Tech firms have been investing record amounts in generative AI startups and substantially in Nvidia's processors to run large workloads and create AI models. Even while that market is expanding quickly, investors are becoming more concerned that other current problems would cause them to cut back on their expenditure.
Companies are probably going to keep emphasising their attempts to reduce expenses and increase profits on this week's earnings calls, continuing an efficiency theme that has permeated the sector since early last year.
After the market closes on Tuesday, Tesla will begin its annual report to investors. The company's shares are currently at their lowest level since January 2023.
On Wednesday, Meta will follow, having already experienced its largest weekly stock decline since August. This Thursday's report from Alphabet, the parent company of Google and Microsoft, provides Wall Street with a detailed look at how companies are allocating their funds for AI infrastructure.
These are a few of the major problems that the Big Tech companies have identified in their reports for this week.
Tesla
On Monday, Tesla's stock dropped for a seventh day in a row, and it is now down 43% for the year. It is anticipated that Elon Musk's electric vehicle company would post a 5% dip in sales. This would be the first year-over-year revenue decline since 2020, when the Covid epidemic caused operational disruptions.
Tesla's earnings come after the firm revealed a brutal quarterly deliveries report and further price reductions for both its flagship driver assistance technology and its automobiles.
The EV manufacturer stated last week that it was terminating over 10% of its employees on the same day that leaders Rohan Patel and Drew Baglino made their exit announcements.
In a message outlining the layoffs, Musk stated, "As we prepare the company for our next phase of growth, it is extremely important to look at every aspect of the company for cost reductions and increasing productivity."
Two days later, Musk issued an email to the staff alerting them to the fact that certain laid-off employees had received "incorrectly low" severance payments from the company. Additionally, in order to address a "stuck pedal" issue that was highlighted in a widely shared TikTok video, Tesla voluntarily recalled more than 3,800 Cybertrucks on April 12.
“Since late 2023, sentiment on Tesla has deteriorated,” wrote John Murphy, an analyst at Bank of America, in a note on Monday.
Meta
Despite its decline last week, Meta has been a solid investment for investors this year. After nearly tripling in value the previous year, when CEO Mark Zuckerberg declared to Wall Street that 2023 would be the company's "year of efficiency," the stock is up 36% in 2024.
However, Meta still has a lot of questions. For starters, the company's Reality Labs division—which houses all of the virtual reality technology for the emerging metaverse—is predicted to report a loss of more than $4 billion for the second consecutive quarter.
In terms of AI, last week saw the launch of Meta's assistant, Meta AI, on Facebook, Instagram, WhatsApp, and Messenger. It was the company's largest AI project to date and will compete with Google's Gemini and OpenAI's ChatGPT.
However, Meta AI sparked debate right away. The assistant allegedly joined a Facebook group for private parents, claimed to have a gifted and impaired child, and shared remarks about their experiences with educational programmes in the New York region. In a different instance, it supposedly joined a Buy Nothing forum and attempted to conduct freebies for fictitious goods.
Now that President Joe Biden and Republican Donald Trump are getting ready to face battle for a second time, Meta needs to demonstrate that it's prepared for what will undoubtedly be a fierce election season. Since Trump's triumphant 2016 presidential campaign, Facebook has posed a challenge for political discourse and disinformation.
LSEG projects that Meta will record sales growth of 26% to $36.16 billion from the previous year. Since 2021, that would be the quickest rate of expansion.
Alphabet
The focus will probably be on Alphabet on a busy Thursday for tech results.
As the business allocates more resources to artificial intelligence, Google's finance director Ruth Porat revealed last week that the department would be reorganised, resulting in relocations and layoffs.
Following a series of protests about labour conditions and the company's contract to supply cloud computing and artificial intelligence services to the Israeli government and military, Google fired 28 employees on the same day, according to an internal memo seen by CNBC.
The firings followed the arrest of nine Google employees on trespassing charges on Tuesday night. The employees staged a sit-in at the company's facilities in Sunnyvale, California, and New York, as well as a protest in the office of Google Cloud CEO Thomas Kurian.
According to employees engaged, hundreds of people attended the protests outside Google offices in New York, Sunnyvale, and Seattle around the same time as the arrests, which were livestreamed on Twitch by participants.
Alphabet CEO Sundar Pichai stated on Thursday that Google DeepMind will now house all of the company's AI teams, including responsible AI and associated research teams. Employees should not "attempt to use the company as a personal platform, or to fight over disruptive issues or debate politics," he stated in a memo. After all, "this is a business."
Since the epidemic, Pichai has found it difficult to calm employee resentment over a variety of issues as the business has had to deal with slower development than in previous years and an investor base that has grown more worried about costs.
Analysts predict a 13% rise in revenue for the first quarter, which would be the second consecutive quarter with year-over-year growth in the low teens. Between mid-2022 and mid-2023, there was a four-period stretch of single-digit expansion as marketers withdrew owing to surging inflation and rising interest rates.
Alphabet's stock has increased by 12% so far this year, above the 5.1% increase in the S&P 500.
(Source:www.cnbc.com)
Protests and reorganisations have occurred at Google, and Tesla recently revealed massive layoffs, price reductions, and a Cybertruck recall. Microsoft's OpenAI partnership is under increased scrutiny, and Meta, the parent company of Facebook, had a rough go of it last week when it rolled out its new AI assistant.
The alarming announcement coincides with a generative AI gold rush, as major tech companies scramble to incorporate the new technology into their extensive product and feature portfolios in order to stay competitive in a sector expected to reach $1 trillion in sales in less than ten years.
Because of Wall Street's obvious trepidation over the impending outcome, the tech-heavy Nasdaq Composite saw its worst weekly decline since November 2022 last week, falling 5.5%. Leading the decline was Nvidia, which has become a darling in AI, which fell 14%.
“Whether this tech sell-off continues, I think really depends on how the mega-cap tech reports,” said King Lip, chief strategist at BakerAvenue Wealth Management, in an interview with CNBC. “Valuations have definitely been more reasonable now, now that we’ve had a little bit of a correction.”
According to Lip, his company has "trimmed some of our tech exposure" during the past few weeks.
Tech firms have been investing record amounts in generative AI startups and substantially in Nvidia's processors to run large workloads and create AI models. Even while that market is expanding quickly, investors are becoming more concerned that other current problems would cause them to cut back on their expenditure.
Companies are probably going to keep emphasising their attempts to reduce expenses and increase profits on this week's earnings calls, continuing an efficiency theme that has permeated the sector since early last year.
After the market closes on Tuesday, Tesla will begin its annual report to investors. The company's shares are currently at their lowest level since January 2023.
On Wednesday, Meta will follow, having already experienced its largest weekly stock decline since August. This Thursday's report from Alphabet, the parent company of Google and Microsoft, provides Wall Street with a detailed look at how companies are allocating their funds for AI infrastructure.
These are a few of the major problems that the Big Tech companies have identified in their reports for this week.
Tesla
On Monday, Tesla's stock dropped for a seventh day in a row, and it is now down 43% for the year. It is anticipated that Elon Musk's electric vehicle company would post a 5% dip in sales. This would be the first year-over-year revenue decline since 2020, when the Covid epidemic caused operational disruptions.
Tesla's earnings come after the firm revealed a brutal quarterly deliveries report and further price reductions for both its flagship driver assistance technology and its automobiles.
The EV manufacturer stated last week that it was terminating over 10% of its employees on the same day that leaders Rohan Patel and Drew Baglino made their exit announcements.
In a message outlining the layoffs, Musk stated, "As we prepare the company for our next phase of growth, it is extremely important to look at every aspect of the company for cost reductions and increasing productivity."
Two days later, Musk issued an email to the staff alerting them to the fact that certain laid-off employees had received "incorrectly low" severance payments from the company. Additionally, in order to address a "stuck pedal" issue that was highlighted in a widely shared TikTok video, Tesla voluntarily recalled more than 3,800 Cybertrucks on April 12.
“Since late 2023, sentiment on Tesla has deteriorated,” wrote John Murphy, an analyst at Bank of America, in a note on Monday.
Meta
Despite its decline last week, Meta has been a solid investment for investors this year. After nearly tripling in value the previous year, when CEO Mark Zuckerberg declared to Wall Street that 2023 would be the company's "year of efficiency," the stock is up 36% in 2024.
However, Meta still has a lot of questions. For starters, the company's Reality Labs division—which houses all of the virtual reality technology for the emerging metaverse—is predicted to report a loss of more than $4 billion for the second consecutive quarter.
In terms of AI, last week saw the launch of Meta's assistant, Meta AI, on Facebook, Instagram, WhatsApp, and Messenger. It was the company's largest AI project to date and will compete with Google's Gemini and OpenAI's ChatGPT.
However, Meta AI sparked debate right away. The assistant allegedly joined a Facebook group for private parents, claimed to have a gifted and impaired child, and shared remarks about their experiences with educational programmes in the New York region. In a different instance, it supposedly joined a Buy Nothing forum and attempted to conduct freebies for fictitious goods.
Now that President Joe Biden and Republican Donald Trump are getting ready to face battle for a second time, Meta needs to demonstrate that it's prepared for what will undoubtedly be a fierce election season. Since Trump's triumphant 2016 presidential campaign, Facebook has posed a challenge for political discourse and disinformation.
LSEG projects that Meta will record sales growth of 26% to $36.16 billion from the previous year. Since 2021, that would be the quickest rate of expansion.
Alphabet
The focus will probably be on Alphabet on a busy Thursday for tech results.
As the business allocates more resources to artificial intelligence, Google's finance director Ruth Porat revealed last week that the department would be reorganised, resulting in relocations and layoffs.
Following a series of protests about labour conditions and the company's contract to supply cloud computing and artificial intelligence services to the Israeli government and military, Google fired 28 employees on the same day, according to an internal memo seen by CNBC.
The firings followed the arrest of nine Google employees on trespassing charges on Tuesday night. The employees staged a sit-in at the company's facilities in Sunnyvale, California, and New York, as well as a protest in the office of Google Cloud CEO Thomas Kurian.
According to employees engaged, hundreds of people attended the protests outside Google offices in New York, Sunnyvale, and Seattle around the same time as the arrests, which were livestreamed on Twitch by participants.
Alphabet CEO Sundar Pichai stated on Thursday that Google DeepMind will now house all of the company's AI teams, including responsible AI and associated research teams. Employees should not "attempt to use the company as a personal platform, or to fight over disruptive issues or debate politics," he stated in a memo. After all, "this is a business."
Since the epidemic, Pichai has found it difficult to calm employee resentment over a variety of issues as the business has had to deal with slower development than in previous years and an investor base that has grown more worried about costs.
Analysts predict a 13% rise in revenue for the first quarter, which would be the second consecutive quarter with year-over-year growth in the low teens. Between mid-2022 and mid-2023, there was a four-period stretch of single-digit expansion as marketers withdrew owing to surging inflation and rising interest rates.
Alphabet's stock has increased by 12% so far this year, above the 5.1% increase in the S&P 500.
(Source:www.cnbc.com)
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