Investors Rattled as Meta and Microsoft Earnings Reports Signal AI Investment
Investors Rattled as Meta and Microsoft Earnings Reports Signal AI Investment
By:JJ Kinahan
Meanwhile, Amazon gains despite mixed revenue and Apple slips on iPhone forecast
- Meta and Microsoft’s increased AI spending raises concern among investors but signals long-term growth potential.
- Amazon and Apple report mixed earnings; Amazon rises on strong results but Apple declines on a weaker forecast.
- Economic reports show modest increase in inflation increase and weak job growth, with manufacturing hampered by Boeing strikeStocks took a hit yesterday after earnings reports from Meta Platforms (META) and Microsoft (MSFT) worried investors. The S&P 500 dropped 1.9%, the Nasdaq Composite lost 2.76% and the Russell 2000 fell 1.7%. The Dow Jones Industrial Average held up best, dipping just under 1%.
Yesterday's inflation update showed core personal consumption expenditures (PCE) prices rose 0.3% in October, in line with expectations, with a year-over-year increase of 2.7%, slightly above estimates.
Employment numbers, however, were weak, with only 12,000 jobs added, missing the 106,000 forecast, and unemployment holding at 4.1%.
The manufacturing sector saw notable job losses, likely because of a Boeing strike, with September and August numbers revised down by 112,000 jobs combined.
Apple and Amazon earnings
Amazon (AMZN) and Apple AAPL released quarterly earnings after the close on yesterday.
Amazon showed strong overall performance, though cloud revenue was slightly below projections. Shares rose 6% after-hours, recovering from a 3.4% decline earlier in the day.
Apple reported earnings and revenue beats but saw net income decline because of a European tax-related payment and gave a cautious iPhone forecast. Services revenue also missed estimates, with shares down 1.8% in after-hours trading.
AI rollout continues
Meta and Microsoft’s earnings reports reflected rising expenses in artificial intelligence (AI) investments, which added to investor concern.
These AI investments, while costly, signal long-term growth potential similar to the early internet era, likely benefiting data centers, chip makers and even nuclear energy companies like Oklo (OKLO). The AI sector is still in its infrastructure phase, setting up for future consumer-oriented offerings.
Additional news includes a tentative resolution of the Boeing (BA) strike resolution, Ford (F) halting F-150 EV production, an upbeat Intel (INTC) upbeat earnings and Exxon (XOM) and Chevron (CVX) reporting strong earnings and dividend increases.
Today’s trading may be influenced by earnings reports, jobs data, positioning ahead of next week’s election and the Federal Reserve’s interest rate decision on Nov. 7.
Sticking to long-term investment plans remains advisable.
JJ Kinahan is CEO of IG North America—which includes tastylive, tastytrade and IG's FX Business. Kinahan traded for 21 years at the Chicago Board Options Exchange. He serves on the CBOE Advisory Board and the SIFMA Options Committee. @thejjkinahan
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