Yazılar

Alphabet Faces Investor Scrutiny Over AI Spending Amid Slowing Cloud Growth

/in /tarafından

Alphabet is set to report earnings on Tuesday, with investors closely watching its substantial AI investments as revenue growth slows due to weaker advertising and cloud performance. The Google parent’s capital expenditure for 2024 is estimated at $50 billion, with further increases expected in 2025 to support cloud expansion and AI-driven search enhancements.

The rise of low-cost AI models, such as those from Chinese startup DeepSeek, has intensified concerns over a potential AI price war. Alphabet, like Microsoft and Meta, is defending its high AI spending, arguing it is necessary to maintain a competitive edge.

Google Cloud, a key growth driver, is anticipated to show a slowdown in the fourth quarter. The segment is expected to report a 32% revenue increase, compared to 35% in the previous quarter. This performance will be scrutinized following Microsoft’s recent results, where Azure’s core cloud services underperformed despite AI-driven gains. Analysts are keen to see whether Google experiences a similar trend.

Alphabet’s Search and Other revenue is projected to have grown 11.2% in Q4, slightly lower than the 12.2% increase in Q3. The company continues to face rising competition from Amazon and TikTok in the digital ad space. However, higher political ad spending linked to the upcoming U.S. Presidential elections may have provided a temporary boost.

Overall, Alphabet’s revenue is estimated to have grown 11.9% year-over-year to $96.6 billion, reflecting a slowdown from the previous quarter. Despite a 7% rise in its stock price this year, concerns about a potential deceleration in its cloud segment have mounted, especially after Microsoft’s disappointing cloud results.

Investors will be closely watching Alphabet’s ability to balance AI investments with profitability, as well as its strategy to maintain leadership in both the search and cloud computing markets.

 

Global Stock Traders Face Dip-Buying Dilemma After Crushing Selloff

/in /tarafından

A massive selloff has unsettled global equity markets, leaving investors uncertain about buying stocks at lower prices. Concerns over the U.S. economy and disappointing tech earnings have cast a shadow over the outlook, potentially leading to further losses. Last week, the S&P 500 dropped nearly 6% from its July peak, while the tech-heavy Nasdaq Composite experienced its first 10% correction since early 2022. Markets in Europe and Asia also plummeted, with Japan’s Nikkei index losing almost 5%.

Investors now face a dilemma: whether to buy during this dip or hold off amid recession fears. Historically, the S&P 500 has fallen an average of 29% during recessions, according to Truist Advisory Services. Additionally, Warren Buffett’s Berkshire Hathaway reported selling half its stake in Apple and increasing its cash reserves, signaling caution.

Mark Travis, portfolio manager at Intrepid Capital, noted that investors are reassessing risks due to high valuations. Despite a strong year driven by AI technology and a resilient economy, the recent selloff has dampened risk appetite. Concerns that the Federal Reserve might be delaying interest rate cuts have led traders to move from high-valued stocks to safer investments like U.S. government bonds.

Some investors, however, view the selloff as a temporary setback and are considering buying opportunities. The S&P 500 and Nasdaq are still up around 12% year-to-date, with Nvidia showing significant gains despite recent declines. Economists found positives in the latest jobs report, and some tech companies, including Apple and Meta Platforms, delivered strong earnings.

Nevertheless, stock valuations remain high by historical standards, potentially leading to further selling. The S&P 500’s valuation has decreased slightly but remains above its long-term average. Market strategist Art Hogan highlighted the market’s tendency to overreact to economic normalization signs, potentially leading to profit-taking.

With limited major economic data releases until mid-August, markets may remain volatile. The Cboe Volatility Index, known as Wall Street’s fear gauge, reached its highest level since March 2023, indicating increased demand for options protection. Additionally, the yield on the benchmark 10-year U.S. Treasury dropped significantly, reflecting expectations of future rate cuts and investor caution.