The Big Tech gains are here, and investors are hoping they don’t spoil the good vibes on Wall Street.
Markets are coming off one of their worst years in history, but they’ve been bullish in the first few weeks of 2023. Three giant tech earnings reports this week – Microsoft, Tesla and Intel – could change that.
What to expect: Microsoft lost $737 billion in market value last year, the third biggest drop of any company in the S&P 500. Last week, it announced it would lay off 10,000 employees and take on a $1.2 billion charge related to the cuts. of jobs in the second quarter, impacting earnings by 12 cents per share.
But investors cheered Microsoft on Monday after it confirmed it is making a “multi-billion dollar” investment in OpenAI, the company behind the new viral AI chatbot tool ChatGPT. Wall Street sent stocks up about 1%. But that doesn’t mean the company’s fourth-quarter earnings report on Tuesday will be pretty.
Wall Street expects Microsoft to earn $2.30 a share and revenue of $52.99 billion. For the year-ago quarter, earnings were $2.48 per share on revenue of $51.73 billion.
On Wednesday, Tesla will report earnings after the bell.
The company’s shares fell to a 52-week low of around $101 last month, but since then shares have risen more than 40% to $144, even as Tesla posted lower-than-expected numbers for fourth quarter production and deliveries. Investors are worried that CEO Elon Musk will get too “thin” from the Twitter acquisition and have to fund the $44 billion buyout by selling more Tesla shares.
Still, Wall Street expects Tesla’s earnings to grow, if not at the explosive pace of recent years. Tesla is forecast to earn $1.14 per share and revenue of $24.22 billion. Last year, the company reported $0.85 per share and revenue of $17.72 billion.
Intel will follow up with gains on Thursday afternoon.
The chipmaker’s shares have fallen 50% over the past 12 months and it is struggling with continued supply shortages, recession risks and weakening demand.
Intel is expected to earn 20 cents a share and revenue of $14.48 billion. For the year-ago quarter, earnings were $1.09 per share on revenue of $19.53 billion.
The big picture: The biggest tech companies learned an important lesson last year – the only thing harder than getting to the top is staying there.
The sector was a popular safe haven for traders during the height of the pandemic. In 2021, the combined annual revenue of Amazon, Apple, Alphabet, Microsoft and Facebook (now Meta) was $1.2 trillion – 25% more than pre-Covid.
As businesses shut down and people – cut off from the physical world – retreated deeper into their digital lives, tech stocks soared.
Apple had so much cash on hand that it ended up buying $90 billion of its own stock back. Eight of the 10 richest people in the world have made money from technology.
Now there has been a reversal of fortune. High inflation and interest rates have taken a big bite out of tech companies that expected pandemic-era growth to continue into the future. As a result, technology’s share of the S&P 500’s total value is shrinking: Apple and Amazon each lost more than $830 billion in market value in 2022.
In 2022, just four names – Microsoft, Apple, Amazon and Google – accounted for about 22% of the entire S&P 500. Today that number is closer to 17%.
This downward trend is likely to continue, analysts say.
Sales growth for these mega-cap tech stocks between 2010 and 2021 averaged an annualized rate of 18%, while overall growth for the S&P 500 was just 5%. Goldman Sachs analysts predict technology growth will slow to 9% between 2021 and 2024, while overall S&P 500 sales growth will reach 7%.
A Big Year: Citadel’s $16B Carriage Breaks Hedge Fund Records
It’s pretty clear that the past year has not been kind to most investors. But some on Wall Street (and in Florida) managed to defy the odds.
Citadel is now the most successful hedge fund of all time, having made $16 billion last year — the highest annual revenue on record, reports my colleague Anna Cooban.
The Miami-based fund, founded and managed by Ken Griffin, topped the 2022 ranking of the world’s best performing hedge funds, based on estimates by LCH Investments NV.
Citadel’s record performance last year brought the fund’s total earnings since its inception to nearly $66 billion. That knocked Ray Dalio’s Bridgewater — with earnings of $58.4 billion — out of the top spot for the first time in seven years.
Dalio’s fund earned $6.2 billion last year, bringing total assets under management to $81 billion. Citadel manages $62 billion in assets.
How did they do it? The answer is pretty vague.
Rick Sopher, president of LCH Investments, said in a press release on Monday that Citadel is not dependent on an investment strategy tied to rising asset prices and has “multiple sources of earnings,” two factors that could explain its gain. record despite mounting volatility for markets last year.
This isn’t just any trading, Citadel deals in everything from equities to commodities and has also made money with its fixed income and macro, quantitative and credit strategies.
Citadel told CNN it would not comment on a story related to its performance.
More layoffs on the way, say business economists
The future looks pretty bleak for the US workforce: most economists expect their companies to cut payrolls in the coming months, according to a new survey released on Monday.
Only 12% of economists polled by the National Association for Business Economics (NABE) predict employment will increase at their companies in the next three months, down from 22% this fall.
The share of economists who expect payrolls to decline at their companies has risen to 19%, according to the survey, reports my colleague Matt Egan.
NABE said this is the first time since 2020 that more respondents predict a decline, rather than growth, in employment at their companies.
The findings indicate “widespread concern about a recession this year,” Julia Coronado, president of NABE and chair of MacroPolicy Perspectives, said in the report.
A barrage of layoffs has hit the economy in recent weeks, including those announced Monday by Spotify. This follows even deeper job cuts last week by Alphabet and Microsoft.
Conclusion: despite layoffs, government statistics show a historically strong job market. The unemployment rate is tied for the lowest level since 1969 and initial jobless claims unexpectedly dropped to 15-week lows.
Source: CNN Brasil
I am an experienced journalist, writer, and editor with a passion for finance and business news. I have been working in the journalism field for over 6 years, covering a variety of topics from finance to technology. As an author at World Stock Market, I specialize in finance business-related topics.
