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Big Tech stocks surged on Friday after Meta and Amazon boosted Wall Street’s confidence that Silicon Valley can deliver further profitable growth while continuing to spend billions on artificial intelligence.
Meta shares climbed 19 per cent higher after its fourth-quarter sales and outlook exceeded forecasts, alongside the surprise introduction of its first-ever quarterly dividend. Amazon rose 6.3 per cent in early trade after reporting bumper holiday retail sales.
Nvidia joined the rally, which comes at the end of a mixed week for tech earnings reports that saw Apple and Alphabet disappoint investors.
The tech-heavy Nasdaq index was 0.8 per cent higher while the broader S&P 500 added 0.3 per cent.
Even as the sector’s latest quarterly numbers failed to demonstrate the anticipated explosion in AI-driven revenues at Microsoft, Amazon and Google, a renewed focus on operational efficiency and capital returns helped sustain investors’ interest after a record end to 2023 for the “Magnificent Seven” stocks.
Meta’s gains came despite the company increasing its projections for capital expenditure this year as it continues to pour billions into AI and metaverse technology. Mark Zuckerberg, chief executive of Facebook’s parent company, told investors he had a newfound appreciation for efficiency after cutting thousands of jobs last year.
“I feel like I’ve really come around to thinking that we operate better as a leaner company,” he said, adding that headcount increases would be “relatively minimal” even beyond this year.
Amazon’s chief executive Andy Jassy said AI revenues would reach “tens of billions” in future, helping the company’s stock to further gains even after rising by about 50 per cent over the past year.
However, Apple fell 2.5 per cent as its latest results confirmed investors’ fears about a slowdown in China, despite a promise from chief executive Tim Cook that it would launch new AI features later this year. Alphabet’s shares had fallen 7 per cent on Wednesday after Google’s advertising revenues failed to show the benefit of its latest AI innovations. They fell a further 1.7 per cent in early trade on Friday.
“We’re starting to see the Magnificent Seven diverge. Who knows, we could have a magnificent three or magnificent four by the end of the year,” said Anthi Tsouvali, multi-asset strategist at State Street Global Markets. “They’re not all going to do as well [in 2024] as they did last year.”
Concerns last year over inflation and the path of US interest rates meant investors poured cash into haven money market funds and “safe and secure” Big Tech stocks with strong balance sheets, “safe in the knowledge that they were investing in companies which are almost guaranteed to do well”, said Seema Shah, chief global strategist at Principal Asset Management.
“The Magnificent Seven aren’t going to be decrowned anytime soon, but they’re also unlikely to do quite as well in 2024 as they did in 2023,” Shah said.