Tech stocks lose $700B as investors focus on AI capex and cash flow
Approximately $700 billion in market capitalization was lost by major tech companies in the week following earnings releases, as investors shifted focus to net cash flow and the ability to sustain AI investments. Intel fell 25% and Google dropped 13%, while Microsoft rose on strong profit growth and cost discipline.
Approximately 700 billion US dollars in market capitalization were lost by major tech companies in the week following earnings releases. Investors shifted focus to fundamental data, specifically net cash flow and the ability to sustain AI investments. Microsoft reported a 19% increase in Q1 net profit to 36.6 billion US dollars and announced voluntary severance for 60,000 employees, causing its stock to rise. SK Hynix gained 6% on strong results.
Conversely, Intel fell 25%, Amazon lost 7% after hours and closed down 4%, and Google dropped 13% despite good numbers, as operating profit missed forecasts and cash reserves were questioned. Apple, trading near its all-time high of 340 dollars, is expected to report earnings soon, with analysts noting it is navigating the AI competition differently than peers. The Chinese AI index crashed 40% in less than four months. OpenAI announced it will buy chips from Google, a competitor to Nvidia. The market is currently punishing companies with high capital expenditure requirements for AI, while rewarding those with strong cash flow and cost discipline, viewing the Google correction as an overreaction and potential entry opportunity.