- The Nasdaq 100 Index is on the verge of a correction as big tech struggles and earnings reports from tech giants approach.
- Critical week ahead with Microsoft, Apple, Amazon earnings and Fed rate decision looming.
OUR TAKE
The Nasdaq 100 Index is teetering on the edge of a correction, largely due to Big Tech stocks not doing so well lately. This dip comes just as tech giants like Microsoft, Apple and Amazon are about to release their earnings reports, which could really move the market. There’s also a big Fed decision on interest rates coming up this week, adding another layer of suspense. What happens next could really set the scene for the market’s next moves, especially around tech and economic policy. If these companies show they’re still solid, investors could breathe a sigh of relief. But if they miss the mark, we could see the market take another hit.
—Heidi Luo, BTW reporter
What happened
The Nasdaq 100 index has fallen 8% in just over two weeks, on the verge of a correction. Whether it can avoid this uncertain milestone is likely to depend on the results of a quartet of companies with a combined value of almost $10 trillion, according to Bloomberg.
The downturn began after Alphabet’s latest results raised concerns about the sustainability of its heavy investment in artificial intelligence, impacting broader market sentiment.
This week, all eyes will be on Microsoft, Meta Platforms, Apple and Amazon, whose results could either stabilise or further shake up the tech sector. With the Federal Reserve’s interest rate decision also on the horizon, these results are particularly critical.
“These results are really important,” said Michael O’Rourke, chief market strategist at Jonestrading. “If you can’t beat expectations, then I think the interpretation is that AI isn’t delivering in the way that people had hoped.”
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Why it’s important
The market was rocked by a rapid and dramatic shift away from AI-heavy tech stocks, driven by fears that the AI boom had gone too far. This led to a massive $2.6 trillion drop in the Nasdaq 100 as investors moved their money into sectors that hadn’t performed as well, such as small companies and traditional industries like finance and manufacturing.
Microsoft is first. The tech giant is ramping up its AI game, pouring $11 billion into its data centres last quarter, with plans to increase that investment to $13 billion in the coming months.
Meanwhile, Meta Platforms and Amazon, who will report their results soon, are also investing heavily in AI. The market is keen to see if these bets are starting to pay off in terms of increased revenues.
Apple is also in the spotlight. Its shares are up 32% since April, fuelled by excitement over its AI-enhanced iPhones. When it reports earnings on Thursday, investors will be eager for updates on these AI initiatives.
Although the Nasdaq 100 bounced back slightly with a 1% gain on Friday, it still hasn’t recouped its earlier losses. The move really accelerated after a June report suggested that inflation was cooling, leading investors to believe that the Federal Reserve could start cutting interest rates.
Upcoming earnings reports from major companies will be closely watched to see if investments in AI and other technologies are delivering the expected returns and impacting market valuations.
