Microsoft Dips, Chipmakers Soar as AI Rally Confronts a Split

(CTN News) – On Tuesday, the stock market lost $340 billion due to Microsoft’s disappointing quarterly results. Meanwhile, competing companies vying for supremacy in the artificial intelligence space saw a surge in value from Nvidia and other suppliers of AI chips, as well as from Advanced Micro Devices.

A rift in the AI space was highlighted by the gains in chipmakers and the losses in their largest clients; investors are now wondering whether Wall Street’s AI boom is becoming too big.

“Microsoft announced a significant rise in capital expenditures but a little slowdown in its main cloud business. The wealth of Microsoft shareholders has been transferred to Nvidia stockholders, according to Gil Luria, a senior software analyst at D.A. Davidson.

Microsoft stated in its post-bell report that sales from its Intelligent Cloud division, which is home to the Azure cloud computing platform, increased 19% to $28.5 billion in the quarter that ended on June 30, but it fell short of analysts’ projections of $28.7 billion, according to LSEG data.

Microsoft said that to fulfill the demand for artificial intelligence, it must overcome capacity limits and grow its worldwide network of data centers, which is why its capital expenditures, including financing leasing, increased by 78% to $19 billion in the quarter.

After Microsoft’s report, Meta Platforms saw a roughly 3% decline, while Amazon saw a 2.8% decline. Each of Apple, Alphabet, and Tesla had a 0.5% decline.

Daniel Morgan, senior portfolio manager of Synovus Trust, said that investors are eager to see more outcomes from their significant investments in AI.

That’s what’s ruining everything. Morgan said that the equities had a significant increase ahead of this news.

Investor concerns were heightened by the escalating expense of the AI arms race, as Alphabet said last week that its capital expenditures on generative AI technology had increased more than anticipated.

There were a lot of expectations for technology businesses during earnings season. LSEG I/B/E/S shows that analysts expect technology firms in the S&P 500 to raise their total profits by over 10% on average.

As of Tuesday’s close, concerns over the ballooning cost of constructing AI infrastructure and its underwhelming revenue boost have contributed to the Nasdaq’s 8% decline from its record-high finish on July 10.

Tuesday’s losses on the Nasdaq exceeded 1% in advance of Microsoft’s release.

AMD increased more than 6% after forecasting third-quarter sales above market projections, counting on the continued strength of demand for its AI processors, while Microsoft’s results pulled other Big Tech firms down.

Nvidia’s stock increased 2.6%. The company’s chips are the benchmark for AI computing. Additionally, by selling semiconductors linked to AI, Broadcom gained 1.4%. Qualcomm and Intel gained about 1%.

We remain in a challenging macro environment. AI is very real, but it takes a lot of work, as seen by the capex figures, according to RBC Capital Markets analyst Rishi Jaluria.

Source: Yahoo News