(Bloomberg) — A disappointing earnings report from Meta Platforms Inc. has technology investors on edge as results from some of the stock market’s largest and most important companies are expected in the coming days.
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Shares of the Facebook parent company fell as much as 19% in after-hours trading and an exchange-traded fund tracking the tech-heavy Nasdaq 100 index fell as much as 1% after Meta forecast weaker-than-expected sales for the current quarter, while higher Investment spending targeted.
“While Meta will use AI in its work, it does not appear to be the biggest beneficiary of AI adoption at this time,” said Jack Ablin, chief investment officer at Cresset Wealth Advisors. “The disappointment on the revenue side overshadows any optimism around AI. It is difficult to say what benefit this will have for users, and while AI could ultimately lead to cost savings, this is not yet apparent.”
Alphabet Inc., which merged with Microsoft Corp. on Thursday Reporting profits, it was one of the biggest losers, with a decline of around 3.3%. Amazon.com Inc., whose results are due Tuesday, fell more than 2.5%. Social media companies Snap Inc. and Pinterest Inc. each fell more than 6%, while Reddit Inc. slipped 1.8%.
International Business Machines Corp. and software maker ServiceNow Inc. added to the sentiment as their shares fell 8.5% and 5.5%, respectively, following their own earnings reports. Even Nvidia Corp., the artificial intelligence giant, was hit, with shares falling as much as 2.1%.
“The ‘see what remains’ approach of years past will not be tolerated by the investor base,” Sophie Lund-Yates, an analyst at Hargreaves Lansdown, wrote in a note Wednesday, adding that while Meta’s resources are vast, they are not be huge, not infinite. “The language around spending plans has once again become bolder and that could unsettle markets.”
Analysts at Lynx Equity Strategies say Meta’s returns raise questions that go beyond the specific business and go to the heart of the broader AI investment thesis.
“With all this attention on AI, why is the company unable to beat June expectations?” said Lynx analysts KC Rajkumar and Jahanara Ahmed. “Does the monetization of genetic AI meet management expectations?”
– With assistance from Katrina Compoli and Ryan Vlastelica.
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