AI companied experienced a significant setback on February 1, 2024, when their market value dropped by $190 billion after the quarterly results of Microsoft, Alphabet, and Advanced Micro Devices (AMD) failed to meet the high expectations of investors.
The plummeting stock prices followed the financial reports of these tech behemoths, highlighting that expectations from companies betting on the recent AI boom were more than what they delivered. Notably, despite the surge of investors’ interest in stocks of these companies, premised on the potential returns from AI technology, the outcome was a huge disappointment.
Alphabet, Google’s parent company, recorded a stock price drop of 5.6% as its ad revenue for the December quarter did not meet expectations. Additionally, Alphabet stated its intention to increase spending on data centers in support of its AI projects, stressing the costly nature of vying with Microsoft in the AI sector.
While Alphabet made moderate profits through Google Cloud due to AI-related interest, Microsoft’s Azure cloud service recorded more significant growth. Microsoft’s overall revenue exceeded analyst predictions thanks to new AI functionalities that lured in more customers. Despite this, Microsoft’s stock price experienced a decrease after the announcement.
The buzz over AI had earlier this month rocketed Microsoft’s stock value to over $3 trillion, surpassing Apple in worth. However, the investor optimism diminished somewhat following these reports. AMD’s stock also declined by 6% as its projected revenue for the ensuing quarter fell short of expectations, even though it foresaw robust sales for its AI processors.
In spite of Nvidia’s stock surging 27% in January due to AI hype, post tripling last year, there was a fall of over 2% in its stock price. Super Micro Computer, which manufactures servers and reached a record high after notable quarterly results, also saw a descent of more than 3%.
These substantial market value losses underscore the uneven path that AI might traverse, despite massive hope in its future. Investors are closely monitoring whether these companies can rise to meet their high expectations.
