AI Dream Turns Nightmarish: $190B Wiped Out After After Microsoft, Alphabet, AMD Earnings
Following the quarterly earnings reports of Microsoft Corp. (NASDAQ:MSFT), Alphabet Inc. (NASDAQ:GOOGL), and Advanced Micro Devices Inc. (NASDAQ:AMD), the stock market value of AI-related companies plummeted by a staggering $190 billion.
What Happened: The stock market value of AI-related companies took a hit after the earnings reports of tech giants Microsoft, Alphabet, and AMD failed to meet investor expectations, Reuters reported on Wednesday. This selloff highlighted investors’ high expectations 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, underlining the costs of its fierce competition with AI rival Microsoft.
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Despite beating analyst estimates for quarterly revenue, Microsoft’s stock dropped by 0.7% in extended trade. This was after the company’s stock reached an intra-day record high earlier in the day, 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 was also observed in other AI-related companies, such as Nvidia Corp. (NASDAQ:NVDA) and server maker Super Micro Computer.
Why It Matters: The recent decline in AI-related stocks is a stark contrast to the market’s performance earlier in January. Tech stocks, particularly AI companies, were driving the S&P 500 index towards a new record high, originally set in January 2022.
Jim Cramer, the host of CNBC's "Mad Money," advised investors to hold off on making any major decisions in response to the recent market turbulence. He flagged ‘too much noise’ after tech stock stumble.
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