The S&P 500 was up 0.3% this morning but still had a long way to go to recover yesterday's steep losses. Chip giant Intel reported a strong set of numbers and upbeat forward guidance last night. The stock was up 5% in early trade, helping to calm nerves shredded by yesterday's selloff. Adding to the better tone was a sharp pullback in crude oil prices after Thursday's surge.
Source: TN Trader
On Wednesday, Alphabet reported blow-out results, particularly with its Cloud revenue growth, which rose 82% from this time last year. The first AI hyperscaler to report this quarter raised its guidance for capex spending, but this came at a cost of negative free cash flow for the quarter. The stock fell 6.9%, although it has steadied in overnight trade.
Tesla posted record sales, but earnings per share and gross margins disappointed. It also announced a surge in capex, but, as with Alphabet, this translated into negative cash flow for the quarter. Tesla slumped 14.5% yesterday.
Investors are concerned that this could be the story of the quarter, which puts considerable pressure on Amazon, Meta and Microsoft when they report next week. Investors are once again expressing concern over current AI valuations, given the uncertain return on capital expenditure, and how that money will be raised, as it cannot be covered by free cash flow anymore.
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