Tech Earnings Put Pressure on Wall Street

On Wednesday, July 24, the Nasdaq (US-TECH 100) reached a new record low, losing over 3% and marking “its worst day since 2022.” In addition, for the first time in over a year, the S&P 500 lost about 2%. Conversely, the Vix Volatility Index (VIX), known as the “fear gauge,” rose to 18.46, its highest level since late April, as market jitters materialised.

Perhaps surprisingly, some of the world’s leading tech giants were among the companies that dragged these Wall Street indices downward and generated market volatility. Let’s take a closer look:

Alphabet Drops on AI Uncertainty

Tech behemoth and Google’s parent company, Alphabet (GOOG), reported its earnings on Tuesday, 23 July.

Interestingly, on Wednesday, the company fell by about 3% and “was on track to lose around $60 billion in market value despite reporting above-expected earnings and revenue. This is because although the company performed better on search ads and cloud growth, it needed to adhere to expectations regarding YouTube ad sales. Other ad-reliant companies like Meta (META), Snap (SNAP), and Pinterest (PINS) also slid that day. 

Additionally, although Alphabet, like many of its peers, spent billions of dollars on artificial intelligence (AI), and despite many analysts being bullish on these investments, according to the company’s CEO Sundar Pichai, the “benefits [Google] is seeing in [Google Cloud Platform] on AI productisation still seems difficult to discern, as is the full payoff that Google should see,” adding that the actual revenue benefits might not be realised until H1 2025. This, in turn, may have induced the uncertainty surrounding the company’s AI efforts, leading to sell-offs.

Despite Wednesday’s woes, it is important to note that Alphabet gained about 30% since the start of the year.

Tesla Dives on Mixed Earnings

Electric vehicle (EV) giant Tesla (TSLA) also fell on Wednesday after reporting its Q2 earnings results late Tuesday, 23 July. 

The company lost 12% of its value due to its mixed earnings results, during which it reported that its growth in 2024 would be “notably lower” than in 2023. On the one hand, Tesla’s revenue exceeded expectations at $25.05 billion. On the other hand, its adjusted profits came in below expectations.

Though the company’s EV deliveries were above expectations, they were actually 5% lower than the previous year’s figures. According to Wedbush analyst Dan Ives, “the Tesla demand story has made a shift for the positive after a rough last 6-9 months with stronger than expected 2Q deliveries earlier this month marking a major 'turning point' in the Tesla bull case story looking ahead into 2H24/2025.”

Moreover, the company showed optimism, stating that plans for new vehicles, including more affordable models,"remain on track for the start of production in the first half of 2025. These vehicles will utilise aspects of the next-generation platform as well as aspects of [the] current platforms. They will be able to be produced on the same manufacturing lines as [the] current vehicle line-up.” 

As such, analysts believe that releasing cheaper EVs can boost the company’s stock. However, only time will tell what lies ahead for this EV leader.

Other Tech Giants Fall

Other companies that experienced notable losses on Wednesday were NVIDIA (NVDA), Broadcom (AVGO) and Arm (ARM), which dropped 7%, 8%, and 8%, respectively. 

Beyond the tech realm, companies like Stellantis NV and Nestle SA also fell due to earnings misses, and the Stoxx 600 sank over 1%. (Source: Yahoo Finance)

What Do Analysts Think?

Some analysts say that “there seems to be a broad reassessment of the cost and benefit calculus for the artificial intelligence ecosystem.” They also think that “anxieties about consumer demand also persist due to hints of softening data in the US. These worries could prove temporary in the end, but a collective reappraisal by investors is natural after such a furious rally.” 

Whether the stock market will rebound soon is yet to be determined. Traders and analysts alike will have to monitor any news or economic events that could shift the trajectory of the financial realm in the near future.