This week’s rise in tech stock earnings shines a light on Tesla and Google’s growing problems

Alphabet Inc. CEO Sundar Pichai at the Stanford 2024 Business, Government and Society Forum on Wednesday, April 3, 2024 in Stanford, California, USA.

Justin Sullivan

As the tech giants prepare to report earnings this week, they face a series of dramatic events.

exist GoogleWhen there was protest and reorganization Tesla Remember Cybertruck just announced major layoffs and price cuts. Microsoft’s OpenAI relationship faces new scrutiny Yuan Last week’s major rollout of its new artificial intelligence support didn’t go well.

This troubling news comes at the same time as an artificial intelligence gold rush is brewing, with tech giants racing to include the technology in their vast portfolio of products and features not to back down in a market projected to reach $1 trillion in revenue over ten years.

Public nervousness about Wall Street’s upcoming earnings boosted tech stocks The Nasdaq Composite Index was down 5.5% last week, its biggest weekly decline since November 2022. NvidiaBecomes artificial intelligence darling, plummets 14%, leading

“Whether this technology selloff continues, I think, really depends on how big the tech report is,” King Lip, chief strategist at BakerAvenue Wealth Management, said in a note. Interview on Monday’s “Closing Bell” on CNBC. “The valuation is definitely more reasonable now because we have made some adjustments.”

Lipp said his company had “reduced some of our technology risks” in the past few weeks.

Tech companies are pouring record amounts of money into emerging generative AI startups and investing heavily in Nvidia processors to build AI models and run massive workloads. While the market is growing rapidly, investors are increasingly concerned that other issues at hand could lead to a decline in spending.

In earnings calls this week, companies are likely to highlight their efforts to cut costs and increase profits, a theme running throughout the tech industry since early last year.

Shares of the electric car maker fell to their lowest level since January 2023 after the market closed on Tuesday after Tesla began the technology earnings season. On Wednesday, Meta capped its biggest weekly share price decline since August. Reports from Microsoft and Alphabet on Thursday have Wall Street examining how companies plan their budgets for artificial intelligence infrastructure.

Here are some of the biggest questions facing Big Tech in this week’s report.

On April 15, 2024, a Tesla Cybertruck was parked in the open lot of a Tesla dealership in Austin, Texas.

Brandon Bell

On Monday, Tesla’s stock price fell for the seventh day in a row and is down 43% this year. Elon Musk’s electric vehicle company expects sales to drop about 5%, the first revenue decline in 2020 since the coronavirus pandemic disrupted operations.

Tesla’s quarterly results report disappointing deliveries as the company’s vehicles and its advanced driver-assistance systems continue to lose value.

Last week, Tesla said it would cut more than 10% of its workforce, the same day executives Drew Baglino and Rohan Patel announced layoff departures.

“As we prepare for the next phase of our company’s growth, it is critical to look at all aspects of our company to reduce costs and increase productivity,” Musk wrote in the book. A memo announced layoffs.

Two days later, Musk told employees in an email that the company had offered some of the laid-off workers “very low” severance packages. On April 12, Tesla released a voluntary recall of more than 3,800 Cybertrucks deployed to address the “stock pedal” problem described in a popular TikTok video.

“Confidence in Tesla ( TSLA ) has deteriorated since late 2023,” Bank of America analyst John Murphy wrote in a note on Monday.

Despite last week’s poor performance, Meta remains a good choice for investors this year. The stock will rise 36% in 2024 after nearly tripling last year, while CEO Mark Zuckerberg told Wall Street that 2023 will be the company’s “year of efficiency.”

But Meta still faces many problems. First, its Reality Labs unit, which is responsible for all virtual reality technology for new virtual worlds, is expected to post a quarterly loss of more than $4 billion for the second consecutive quarter.

In terms of artificial intelligence, Meta last week debuted its assistant – Meta AI – on WhatsApp, Instagram, Facebook and Messenger. Basically the biggest artificial intelligence program from the company so far and will compete with OpenAI’s ChatGPT Google’s Gemini.

But Meta AI quickly sparked controversy. The assistant joined a private parent group on Facebook and claimed she was a gifted and disabled child, gushed in comments about their experiences with education programs in the New York area. And reportedly tried to offer freebies for non-existent items.

Now, with US President Joe Biden and Donald Trump gearing up for a second showdown, Meta must show it’s ready for a heated election season. Since Trump’s successful presidential campaign in 2016, Facebook has been a problematic place for political speech and misinformation.

Meta expects revenue to rise 26% year over year to $36.16 billion, according to LSEG. This would be the fastest pace of expansion at any point after 2021.

Alphabet Inc. CEO Sundar Pichai at the Stanford 2024 Business, Government and Society Forum on Wednesday, April 3, 2024 in Stanford, California, USA.

Lorraine Elliott Bloomberg

On Thursday, a busy day for technology financial reports, the letter will likely attract the most attention.

Last week, Chief Financial Officer Ruth Porat announced that the restructuring move will include layoffs and relocations as the company devotes more resources to artificial intelligence.

On the same day, Google laid off 28 workers, according to a reported internal memo to CNBC, following a series of protests over labor conditions and the company’s contracts to provide cloud computing and artificial intelligence services to the Israeli government and military.

Nine Google employees were arrested Tuesday night on trespassing charges after they occupied the company’s offices in New York and Sunnyvale, including protests at the offices of Google Cloud CEO Thomas Kurian, who was later fired. According to the workers involved, the arrests, which were broadcast live on Twitch, coincided with rallies outside Google’s New York, Sunnyvale and Seattle offices that drew hundreds of participants.

Alphabet CEO Sundar Pichai announced Thursday that the combined company’s artificial intelligence team includes Google DeepMind’s responsible artificial intelligence and related research teams. “This is a business,” he said in a memo, and employees “should not try to use the company as a personal platform or to fight or debate politics on harmful issues.”

Since the start of the pandemic, Pichai has been trying to quell employee discontent over a range of issues as the company struggles with slower growth than in previous years and an investor base worried about rising costs.

Analysts expect first-quarter revenue to rise 13%, marking the second quarter of sub-10% growth year over year. From mid-2022 to mid-2023, advertisers pulled back as inflation picked up and interest rates rose, four consecutive single-digit expansions.

Alphabet’s shares have risen 12% this year, outperforming the S&P 500, which gained 5.1%.

Microsoft CEO Satya Nadella (right) speaks during the OpenAI DevDay event on November 6, 2023 in San Francisco, California. Altman gave a keynote address at the first Open AI DevDay conference.

Justin Sullivan

As for Microsoft, the company appears to have narrowly avoided the EU launching an antitrust investigation into its relationship with OpenAI after EU regulators flagged the possibility earlier this year.

Microsoft has invested more than $10 billion in OpenAI and its ChatGPT chatbot is expected to start the generative artificial intelligence boom by the end of 2022. Artificial intelligence has since been a major focus of Microsoft’s earnings calls, as the company has become a key technology partner with OpenAI through its Azure cloud infrastructure.

Microsoft has invested billions in artificial intelligence startup Anthropy and has stakes in Mistral, Figure and Human.

The biggest driver behind the company’s position in artificial intelligence has risen to a market capitalization of more than US$3 trillion. apple As the most valuable American company. However, the stock is up just 6.8% this year, lagging many of its tech peers, and some analysts believe Microsoft’s customer base, particularly small and medium-sized businesses, may be weak in parts.

Guggenheim analysts wrote in a note dated April 21 that there are signs of slowing demand. “

Microsoft expects first-quarter sales to grow 15%, but analysts expect sales to slow over the next three quarters, according to LSEG.

Watch: Tech stocks have more room to fall