Tech stocks see sharp decline in three weeks, led by Amazon, Intel

As quarterly earnings from large-cap tech companies largely come to a close, one thing is clear: Wall Street is worried.

Nasdaq Composite Index collapsed 3.4% this week, bringing the three-week decline to 8.8%. That’s the tech index’s worst performance over that period since September 2022, when the market was pummeled by surging inflation and rising interest rates, according to FactSet.

As of late 2022, the story is largely positive for the tech sector, as the US economy recovers from the pandemic and excitement grows around growth opportunities created by artificial intelligence.

The Nasdaq rose 43% last year and is still up 12% year to date after hitting a record high last month.

But the earnings season has been less than stellar, with some companies reporting weaker-than-expected growth and others raising concerns that building out AI infrastructure could hit some roadblocks.

Hovering over the industry are concerns about the broader U.S. economy. The Labor Department said Friday that employment growth The U.S. economy slowed more than expected in July, while the unemployment rate ticked higher, a day after economic data showed a surge in jobless claims and weakness in the manufacturing sector.

Tech giants with trillion-dollar valuations are increasingly becoming a macroeconomic play because they are so large that weakness in aggregate data naturally shows up in their results, said Josh Koren, founder of Musketeer Capital Partners.

Amazon And Apple Both report earnings on Thursday, with Amazon missing on revenue and gave disappointing forecasts and Apple shows top-line growth of just 5%.

“When the economy slows down, a business like Amazon, like Apple, slows down,” Koren told CNBC’s “Squawk Box Europe” on Friday. “That’s what you see in the earnings.”

Amazon fell 8.8% on Friday, bringing its three-week decline to 14%. Executives on the earnings call attributed some of the revenue shortfall allowing consumers to buy cheaper household goods and less expensive items like computers and TVs.

“We’re seeing a lot of the same consumer trends that we talked about last year, consumers being more cautious with their spending, transactions down,” Amazon chief financial officer Brian Olsavsky said on the call. “We’re seeing signs of that continuing into Q3.”

Apple result Less worrying — the company beat earnings and revenue estimates — and the stock ended slightly higher on Friday and for the week. But that came after falling more than 5% in the previous two weeks.

Microsoft down 4% this week and down 10% over the past three weeks. The tech giant released forecast weaker than expected for the current quarter and missed growth in its Azure cloud segment. “Core Azure consumption was impacted by capacity constraints and weakness in some European geographies,” analysts at Mizuho wrote in a note after the report.

Coupon of Alphabet fell slightly this week after falling 10% in the previous two weeks. income statementThe company’s YouTube ad revenue missed estimates and posted overall ad growth of just 11%. That’s well below its competitors. Metadata22% growth.

Meta is the standout company in the group, with shares up nearly 5% this week after the company beat Wall Street estimates and gave an optimistic forecast for the current quarter. CEO Mark Zuckerberg says the company’s heavy investment in AI is paying off by creating more relevant ads and making it easier for marketers to create campaigns.

“The ways that it improves recommendations and helps people find better content, as well as making the ad experience more effective, I think there’s a lot of upside there,” Zuckerberg said on an earnings call last month. “Those are products that are already at scale. The AI ​​work that we’re doing is going to improve that.”

However, even after that surge, Meta has been falling for the past three weeks.

The only large-cap tech company yet to report results is Nvidia, the biggest winner in the AI ​​craze. Shares fell 17% during the Nasdaq’s three-week slump, though they are still up more than 110% year-to-date.

Nvidia is banking on spending from its top tech rivals as it builds out its AI infrastructure. Given Nvidia’s parabolic price rise over the past few years, any sign of a potential price slide could have a huge impact on the company’s stock. The company is scheduled to report results on August 28.

The downside of the semiconductor market is Wisdom.

Once the world’s largest chipmaker, Intel has been beaten by rivals in recent years and has fallen far behind in the AI ​​race. Its shares have been worst day in 50 years on Friday, plummeting 26% to levels not seen since 2013.

Intel reported a huge loss and announced a massive restructuring that includes cutting 15% of its workforce. CEO Pat Gelsinger told CNBC on Friday that it was “Intel’s most significant restructuring since its transition to memory chips four decades ago.” Investors aren’t convinced it will work.

In a note Friday, analysts at KeyBanc Capital Markets downgraded their estimates and maintained a hold recommendation on the stock, citing a difficult road ahead.

“Given all the challenges INTC is facing, such a large staff reduction would likely make it more difficult to achieve the organization’s goals,” they wrote.