Strong earnings results for tech companies this week spotlight growing problems at Tesla and Google – NBC 6 South Florida

• Tesla released high-tech results on Tuesday that pushed its stock to its lowest since early 2023.
• Meta, Apple, and Microsoft released their reports two days later, and each company faces their own concerns.
• The tech-heavy Nasdaq Composite Index fell 5.5% last week, the steepest weekly decline since November 2022.

Tech giants are scheduled to report earnings this week, but they face mounting drama.

Google has seen protests and layoffs, and Tesla just recently announced mass layoffs, price cuts, and a Cybertruck recall. Microsoft's relationship with OpenAI is facing new scrutiny, and Meta's big rollout of new artificial intelligence assistance last week didn't go so well.

The move comes as tech giants race to incorporate technology into their vast portfolios of products and features to keep up in a market expected to exceed $1 trillion in revenue within a decade. Alarming news is being reported in tandem with the generative AI gold rush.

Wall Street is openly nervous about future earnings, with the tech-heavy Nasdaq Composite Index falling 5.5% last week, its steepest weekly decline since November 2022. Nvidia, which has emerged as an AI darling, led the decline, plummeting 14%.

“Whether or not this decline in tech stocks continues depends on how the coverage of megacap tech stocks goes,” King Lip, chief strategist at Baker Avenue Wealth Management, said in an interview on CNBC's “Closing Bell” on Monday. I think it is,” he said. “Now that there has been a bit of a correction, the valuation is definitely more reasonable.”

Lipp said his company has “reduced some of its exposure to technology” in the past few weeks.

Tech companies are pouring record amounts into emerging generative AI startups, investing heavily in Nvidia processors to build AI models and run large-scale workloads. While this market is growing rapidly, investors are increasingly worried that other immediate issues could lead to a pullback in spending.

This week's earnings calls will likely see companies continue to emphasize efforts to cut costs and boost profits, an efficiency theme that has been running across the tech industry since early last year.

Tesla kicks off its tech earnings season after Tuesday's close, with the electric car maker's stock trading at its lowest since January 2023. Meta also escaped its biggest weekly stock decline since August, continuing on Wednesday. Microsoft and Alphabet released a report Thursday giving Wall Street a detailed look at how companies are planning their budgets for AI infrastructure.

This week's report highlights some of the biggest issues facing big technology companies.

tesla

Tesla stock fell for the seventh day in a row on Monday, dropping 43% for the year. Elon Musk's The EV company is expected to see sales decline by about 5%, which would be the first year-on-year decline since 2020, when business was disrupted by the coronavirus pandemic.

Tesla's earnings came on the back of a weak quarterly delivery report and additional price cuts on its vehicles and premium driver-assistance systems.

Tesla announced last week that it would lay off more than 10% of its workforce, and on the same day executives Drew Baglino and Rohan Patel announced their departures.

“As we prepare the company for its next phase of growth, it is critical that we look at all aspects of the company to reduce costs and improve productivity,” Musk said in a memo announcing the layoffs. ” he said.

Two days later, Musk informed employees in an email that the company had sent “unreasonably low” severance packages to some of the laid-off employees. And on April 12, Tesla announced a voluntary recall of more than 3,800 Cybertrucks to fix a “stuck pedal” issue described in a viral TikTok video.

“Sentiment toward Tesla (TSLA) has worsened since late 2023,” Bank of America analyst John Murphy said in a note Monday.

meta

Despite last week's decline, the meta has been a good bet for investors this year. The stock is up 36% in 2024 after nearly tripling last year. mark zuckerberg told Wall Street that 2023 will be the company's “year of efficiency.”

However, Meta still faces many questions. As an example, his Reality Labs division of the company, which houses all of the virtual reality technology for the nascent Metaverse, is expected to report a quarterly loss of more than his $4 billion for the second consecutive quarter.

When it comes to AI, Meta last week debuted its assistant, Meta AI, on WhatsApp, Instagram, Facebook, and Messenger. This is the company's biggest AI initiative in its history, and will pit it against OpenAI's ChatGPT and Google's Gemini.

But meta-AI quickly sparked controversy. The assistant reportedly joined a private Facebook parent group, claimed to have a gifted and disabled child, and alluded to her experience with a New York area education program in her comments. . In another case, someone reportedly joined the Buy Nothing forum and tried to give away a non-existent product.

As Presidents Joe Biden and Donald Trump gear up for a second showdown, Meta must show it is ready for what is sure to be a heated election season. Dating back to Trump's successful presidential bid in 2016, Facebook has had problems as a destination for political speech and misinformation.

According to LSEG, Meta's sales are expected to increase 26% year over year to $36.16 billion. This would be the fastest rate of expansion in any period since 2021.

alphabet

Alphabet is likely to get the most attention on Thursday, a busy day for tech company earnings.

Last week, CFO Ruth Porat announced a restructuring of Google's finance department, which will include layoffs and reassignments as the company dedicates more resources to AI.

Google laid off 28 employees on the same day, following a series of protests over working conditions and the company's contract to provide cloud computing and artificial intelligence services to the Israeli government and military, according to an internal memo seen by CNBC. did.

The firings come after nine Google employees were arrested on trespassing charges after holding sit-ins at the company's offices in New York and Sunnyvale, Calif., including a protest at Google Cloud CEO Thomas Kurian's office Tuesday night. This was done in response to what was said. The arrest, which was livestreamed by participants on Twitch, coincided with rallies outside Google's offices in New York, Sunnyvale and Seattle, which drew hundreds of people, officials said.

On Thursday, Alphabet CEO Sundar Pichai announced that the company's AI teams, including its responsible AI and related research teams, will be integrated into the Google DeepMind umbrella. “This is a business,” he said in the memo, and employees should not “seek to use the company as a personal platform, fight over disruptive issues, or discuss politics.” Stated.

Pichai has struggled to quell employee dissatisfaction on a number of issues since the pandemic. That's because the company is having to take into account slower growth than in past years and an increased focus on costs among its investor base.

Analysts expect first-quarter sales to rise 13%, which would be the second consecutive quarter of year-over-year growth in the low teens. For four consecutive quarters, from mid-2022 to mid-2023, growth remained in the single digits as advertisers pulled out due to soaring inflation and rising interest rates.

Alphabet stock has risen 12% this year, outpacing the S&P 500, which has risen 5.1%.

microsoft

As for Microsoft, the company appears to have narrowly avoided a European Union antitrust investigation into its relationship with OpenAI, as EU regulators flagged the possibility earlier this year.

Microsoft has invested more than $10 billion in OpenAI, and its ChatGPT chatbot helped spark the generative AI boom in late 2022. Since then, AI has been a major focus of Microsoft's earnings calls, as the company serves as OpenAI's primary technology partner through its Azure cloud infrastructure. .

Microsoft has also invested billions in AI startup Anthropic and has acquired stakes in Mistral, Figure, and Humane.

The company's position in the AI ​​field has been the biggest driving force behind its rise to become the most valuable US company, surpassing Apple, with a market capitalization of $3 trillion. But the company's share price has risen just 6.8% this year, lagging behind many tech companies, and some analysts believe Microsoft's customer base, particularly small and medium-sized enterprises, could potentially I see it as getting weaker.

“MSFT has greater exposure to small businesses and consumers than any other stock we cover,” Guggenheim analysts wrote in an April 21 note. It's a sign that demand from them is weakening. ”

Microsoft is expected to report 15% revenue growth in the first quarter, according to LSEG, but analysts expect it to slow in each of the next three quarters.

clock: Tech stocks have more room to fall