Sometimes the stock market takes, sometimes it gives - the well-known stock market wisdom was once again confirmed that night in New York. While it was previously the tempting prospects of the seemingly endless possibilities of artificial intelligence (AI) that brought stock prices and indices to new record highs, a change in the topic of AI is becoming increasingly louder.
Recently there has hardly been a quarterly report before which there were no concerns that the high valuations of the AI tech giants might be too high. In other words, the companies had to deliver, otherwise there would be trouble - because the fall height is high.
“There is definitely a healthy skepticism about AI right now,” said Brendon Dashiell, portfolio manager at Bogart Wealth. The already high valuations made the sector stocks vulnerable. “Any small setback in the market can therefore lead to a sharp fall in the price of these stocks.”
Meta share under pressure
That's exactly what happened to the Meta share that night, which fell by around seven percent; the loss was even higher during the day's low. Plans by the internet giant to increase investments once again fueled fears that the technology giants will issue more bonds to expand AI infrastructure in an already saturated market.
Meta alone is investing at least $135 billion this year in expanding its AI infrastructure. The booming advertising business continues to provide the money for this. CEO Zuckerberg is aggressively expanding data centers for artificial intelligence in competition with pioneers such as ChatGPT developer OpenAI.
“The message seems to be becoming increasingly clear: the market remains willing to reward large investments in AI, but is increasingly demanding on returns,” said Santiago Mateo, head of equities at CaixaBank AM. “Investors want evidence that investments are translating into stronger growth, better monetization and ultimately profits.”
While Meta's investments raise doubts among market participants, the quarterly figures themselves were well received. In his initial reaction, analyst Doug Anmuth from JPMorgan spoke of good numbers. In the last quarter, Meta increased group sales by 26 percent year-on-year to almost $65 billion. The bottom line was that there was a profit of almost ten billion dollars after $2.7 billion a year ago.
Broad sell-off in chip stocks
Semiconductor stocks, the core of the AI boom, also fell across the board. Papers from the top dog Nvidia fell by over four percent, Micron by over six percent and Broadcom also around four percent. The stock market has long been wondering how long the boom will last. Because demand still exceeds supply - which means that prices are also rising. But can this continue forever and, above all, at what cost?
DAX gives in
The DAX cannot ignore the weak guidance from the Nasdaq and also fell by around 0.7 percent in the early afternoon. The index is now around the 25,200 point mark. This indicates a weekly loss of around 1.6 percent. In addition to the Nasdaq's weak specifications, high oil prices and concerns about French government finances continue to weigh on events.
In the technology sector, it is no longer about the fundamental growth prospects of artificial intelligence (AI), but rather about the question of whether investments can ever be converted into correspondingly high profits, explained CMC Markets expert Andreas Lipkow.
