Big Tech earnings: Disappointed market expects infinite AI money glitch

Big Tech stocks were in the outtray on Wednesday despite and undeniably bullish trio of earnings results emerging from the US megacap cohort.

The least affected of the trio, Microsoft Corp (NASDAQ:MSFT), was last seen around one percentage point lower. Alphabet Inc (NASDAQ:GOOG), meanwhile, was flying 6.5% lower while AMD was down 3.2% after falling as much as 6% in opening exchanges.

Other Big Tech stocks followed suit, with Facebook parent Meta Platforms Inc (NASDAQ:META, ETR:FB2A, SWX:FB) down 1.5% and Nvidia down 2.5%.

Hardly calamitous declines (provided you ignore the fact that one percentage point of Microsoft's $3 trillion market capitalisation is roughly double the size of Iceland’s annual gross domestic product).

But the rebuff was surprising nonetheless, given the Redmond tech titan beat earnings expectations in the fiscal second quarter by a billion dollars.

Alphabet’s share price rejection was slightly more justified given the Google parent missed on advertising revenues, even though fourth-quarter firm-wide revenues also exceeded revenues by around a billion dollars.

Advanced Micro Devices Inc (NASDAQ:AMD, ETR:AMD)’s fourth-quarter sales beat and bullish AI guidance were also not enough to please stakeholders, who were probably spooked by lukewarm guidance on the chipmaker’s embedded and gaming pipelines.

Speaking to Proactive on these results, Option Desk’s Sebastian Blanco said that “investors expect these tech companies not just to meet expectations, but to exceed them significantly”.

Going back to last November, this was particularly evident in Nvidia Corporation (NASDAQ:NVDA)’s third-quarter results.

The fabless chipmaker capped off a blistering year of record revenues and a freshly minted one-trillion-dollar market capitalisation with an $18 billion earnings beat, yet still the shares saw a sell-off in the short term.

Google’s underwhelming advertising revenues are causing “a bit of waning investor confidence” in the search giant, said Blanco, as is AMD’s “conservative first-quarter revenue guidance.

As for Microsoft, the broader consensus seems to be that the market was expecting more out of the AI conversation than what was provided, even though chief executive Satya Nadella said that the company's investment in and partnership with ChatGPT developer OpenAI was a key boost for the Cloud Azure division.

In total, Microsoft attributed 6% of its 30% revenue growth to AI advancements.

As for Google and AMD, both of which have emerged as popular AI stocks, neither commented specifically on the size of their AI revenue bumps, leaving the market open to speculation.

The brief sell off on Big Tech stocks seems to suggest that the market expects AI to act as some sort of infinite earnings glitch rather than the protracted systematic evolution that it really is.

Perhaps this is unfair, but as some of the most overvalued companies in existence, they’ll surely pull through.