Alphabet is one of the biggest movers in Wednesday’s pre-market. Its stock price rises 5.7%, after it released a strong third-quarter earnings report. The company reported third-quarter revenue of $74.5 billion, higher than the $72.8 billion expected. Net income was $26.3 billion, higher than the $24.5 billion expected. Earnings per share were $2.12, beating expectations of $1.97, highlighting how profitable the tech giants are when they’re at full strength.
Alphabet stock price has already surpassed the average 1-day move after the earnings release, which is 5.12%. Therefore, if the stock can continue to extend gains during the US session, it could be a historic move for Alphabet. Investors have welcomed Alphabet’s results with open arms, as rising revenue and profits suggest its expensive bet on AI is starting to pay off.
Google’s commitment to AI pays off
Revenue rose 16% year over year, even though Google is moving away from its traditional search engine business. Revenue from its cloud computing business increased 35% year-on-year. This suggests that although Google had a slow start to sales growth in its cloud computing business, it is now ready to catch up with rivals Amazon and Microsoft. Not only is Google selling AI-enhanced products, but AI is also helping to increase Google’s productivity. The company reported that 25% of the company’s code is now written by AI.
The other positive thing about these results is that Google’s well-known legal problems with US regulators are not affecting its profitability or its ability to generate revenue, which is positive for the stock.
AI moves into its next phase of growth
However, Google’s results are also significant for the AI ​​industry as a whole, and can tell us where it is in its evolution.
Why AMD and Nvidia could see a slowdown in growth
AMD, the maker of chips and processors that power AI, also reported results on Tuesday. Its results were largely in line, revenue was $6.81 billion for the latest quarter, versus expectations of $6.71 billion, while net income was $1.5 billion, versus $1.51 billion expected . EPS was in line at $0.92. However, AMD’s stock price is down more than 8% in pre-market, and is one of the worst performers on Wednesday. This is AMD stock’s worst performance following an earnings report in over 8 quarters. The average 1-day move following its earnings report is 6.8%.
Although AMD’s revenue increased 18% last quarter, its growth outlook for the fourth quarter was slightly lower than expected, which is fueling fears about future growth prospects. The brutal sell-off following this earnings report is a sign that investors are using AMD’s results to tell a bigger story about AI. AMD sells the hardware needed to power AI. This has been a massive growth area in recent years, as companies like Microsoft, Meta and Google try to increase their AI capabilities. However, could AI be advancing to its next stage of evolution? If so, then hardware demand may have peaked, and the new phase could be deployment, which is better for companies selling AI-enhanced products to consumers like Google and Microsoft.
What’s next for Nvidia?
This has ramifications for investors. Nvidia is the world’s largest AI chip maker, and its stock price is the second-best performer on the S&P 500 so far this year, up 185% so far this year. It’s also the top performer within the Magnificent 7 group of US mega-cap tech stocks, as you can see in the chart below. However, if the AI ​​industry is moving into its new phase of growth, then it could allow Google to catch up, the purple line in the chart below.
US tech stocks Magnificent 7, normalized to show how they move together
Source: XTB and Bloomberg
Nvidia’s share price is down 0.7% today in the pre-market. This suggests that fears about slowing demand growth for AI hardware could weigh on one of the biggest stocks in the S&P 500. This could allow for a broadening of tech trading in the US as the issue of AI evolves. AI. It may also lead to further volatility in Nvidia’s stock price as we await its next earnings report due out on November 21.
Source: Fx Street
I am Joshua Winder, a senior-level journalist and editor at World Stock Market. I specialize in covering news related to the stock market and economic trends. With more than 8 years of experience in this field, I have become an expert in financial reporting.
