Is the AI market coming to an end? Check the financial results of Google, Tesla, and semiconductor stocks! Will huge investments continue, and are they effective?
The financial results season for US stocks was a turbulent beginning. Of the Big Tech M7, $Alphabet-A (GOOGL.US)$with $Tesla (TSLA.US)$It plummeted after financial results were announced. It has been pointed out that falling AI expectations are a common factor in the sale of shares of both companies, $NVIDIA (NVDA.US)$Ya $Broadcom (AVGO.US)$AI semiconductor stocks also depreciated drastically.
Will the turbulence at the beginning of financial results suggest the end of the AI market? Or is it just a profit-making sale due to rapid growth before settlement?
From the previous financial results season, which was also the beginning of turbulence,The following 2 points are important as to whether or not the AI market continuesIt has been suggested that is the case.
1) Trends in AI investments, particularly big tech capital investments
2) Trends and forecasts for AI-related earnings
1) Trends in AI investments, particularly big tech capital investments
2) Trends and forecasts for AI-related earnings
This time, I finished announcing financial resultsCheck 1) and 2) above from the financial results of Alphabet, Tesla, and major semiconductor companiesI'll do it. Referring to the previous fiscal season,Also check future points of interestI'll do it.
Looking back on the financial results season three months ago, as financial results were announced closer, questions had arisen in the market about whether AI investments would produce results. When the performance details of some companies fell short of market expectations in the early stages, concerns about it intensified further, and major indices plummeted. Above all, the decline in the SOX Index (Philadelphia Semiconductor Stock Index), which has benefited from the AI investment boom, is severe.It can be said that this trend is quite similar to the beginning of the current financial results。
When I checked the movement since the beginning of the previous round, the main indices achieved a V-shaped recovery, and then regained an upward trend. This is because the financial results of most companies were generally strong, and we were able to confirm plans to expand investment for AI (especially big tech) and the effects of boosting performance with AI. After NVIDIA, which is at the cutting edge of the AI market, announced good financial results, the main indices rose further. In the case of the SOX index, it surpassed the high price before the financial season (upper price resistance line at the time) in the wake of NVIDIA's financial results.
At the moment, I don't know if the development will be similar to the previous one. However, based on my previous experience, it seems that the following 3 points can be said.
①Turbulence at the beginning of financial results does not necessarily mean entering a falling market, and there is no need to be overly vigilant.
②The financial results of most companies after that are more important than some companies in the early stages. However, NVIDIA at the end of the game is exceptional and has a high level of importance.
③Investments for AI in general (big tech investments in particular) continue, and if the benefits are shown in corporate performance, there is a high possibility that the AI market will continue.
Alphabet and Tesla have already announced Big Tech's financial results, $Microsoft (MSFT.US)$with $Meta Platforms (META.US)$、 $Amazon (AMZN.US)$Next week, NVIDIA is scheduled for the end of August. Among them, Microsoft, Meta Platforms, and Amazon.com are NVIDIA's top customers, and the three companies' capital investment trends and AI-related earnings are attracting attention. Therefore, next week may be an imminent mountain. Alphabet and Tesla are also on NVIDIA's main customer list. This time, in addition to both, we will first check investment and profit status for AI from financial results of semiconductor/AI-related stocks.
★ Big tech investments in AI
If you check NVIDIA's main customer list, they line up in the order of Microsoft, Meta Platforms, Alphabet, Amazon.com, and Tesla. Alphabet and Tesla are not as good as Microsoft and Meta, but it shows that they are purchasing large amounts of AI semiconductors from NVIDIA. Therefore, it can be said that trends in capital investment for AI by both companies are also important.
If you check NVIDIA's main customer list, they line up in the order of Microsoft, Meta Platforms, Alphabet, Amazon.com, and Tesla. Alphabet and Tesla are not as good as Microsoft and Meta, but it shows that they are purchasing large amounts of AI semiconductors from NVIDIA. Therefore, it can be said that trends in capital investment for AI by both companies are also important.
●Alphabet
◆The capital investment amount for the April-6 fiscal year increased to 13.2 billion dollars, exceeding market expectations of 12.2 billion dollars. The company explained that it was to respond to Google's AI programs and demand for computing power. It suggests that investment in AI has expanded.
◆The capital investment amount for the April-6 fiscal year increased to 13.2 billion dollars, exceeding market expectations of 12.2 billion dollars. The company explained that it was to respond to Google's AI programs and demand for computing power. It suggests that investment in AI has expanded.
◆The management team revealed at the financial results briefing that NVIDIA's platform equipped with Blackwell's latest AI semiconductor is scheduled to be introduced to Google Cloud in early 2025. At the same time, it was stated that “since many opportunities are expected in the future, we will continue to invest in the design and construction of efficient infrastructure to support AI initiatives.” They indicated their intention to continue expanding their investments in the future.
●Tesla
◆The overall capital investment amount for the April-6 fiscal year was reduced. Of these, the one for AI infrastructure was 0.6 billion dollars, down from 1 billion dollars in the January-March fiscal year.
◆The overall capital investment amount for the April-6 fiscal year was reduced. Of these, the one for AI infrastructure was 0.6 billion dollars, down from 1 billion dollars in the January-March fiscal year.
◆CEO Elon Musk has decided to continue to anticipate a full year capital investment of just over 10 billion dollars. I explained that it was to build a cluster equipped with 0.05 million GPUs. It was stated that the ability to expand FSD (fully autonomous driving technology) and other AI initiatives would be greatly improved due to the new cluster. Incidentally, Mr. Musk revealed in June this year that out of a capital investment plan of just over 10 billion dollars, 3 billion to 4 billion dollars will be used to purchase NVIDIA semiconductors.
When asked about the supercomputer “Dojo” developed for autonomous driving, CEO Musk revealed that demand for NVIDIA GPUs is extremely high, and he is quite worried about whether we can obtain cutting-edge GPUs when we want. It was necessary to put in more effort to secure the training ability necessary for Dojo, and it was decided that Dojo would be further strengthened. I commented that Dojo (equipped with a chip developed in-house) can see a path where it can compete with NVIDIA. This news also led to a decline in NVIDIA shares on July 24. Note that Tesla's ratio to NVIDIA's sales is approximately 3%. Also, Tesla has shown strengthening Dojo, but it is expected that the semiconductor purchase plan from NVIDIA will be maintained so far. Therefore, the impact on NVIDIA appears to be limited so far.
There was a sense that Alphabet and Tesla were slightly behind when it came to acquiring profits from AI investments compared to Microsoft, Amazon.com, etc. However, with the previous financial results announcement, Alphabet dispelled investors' anxiety with steady growth in the cloud business. Tesla had somewhat regained investors' expectations with the announcement of the RoboTaxi announcement. Expectations for further progress were also in the background that stocks of both companies continued to be high until the financial results were announced this time. However, there were no surprises in the financial results, and some financial results fell short of market expectations, which led to profit-making sales.
Please refer to the following for a summary of the financial results of both companies.
[Financial Summary] Google is doing well in advertising, and the cloud business is growing 29%!
[Financial Summary] Tesla's decline outside of time to receive financial results What are future highlights?
[Financial Summary] Google is doing well in advertising, and the cloud business is growing 29%!
[Financial Summary] Tesla's decline outside of time to receive financial results What are future highlights?
Below, the AI introduction and initiatives shown by the management teams of both companies at the financial results briefing will be added.
●Alphabet
◆The management team revealed that the enterprise AI platform Vertex supports customers such as Deutsche Bank, KingFisher, and the US Air Force to build powerful AI agents, and supports Moody's, MSCI, and ZoomInfo as the only cloud provider that provides grounding with Google search. At the same time, it was stated that application portfolios utilizing AI are useful for acquiring new customers and promoting upsells. He emphasized that over time, cloud and AI will be the driving force for significant growth.
◆The management team revealed that the enterprise AI platform Vertex supports customers such as Deutsche Bank, KingFisher, and the US Air Force to build powerful AI agents, and supports Moody's, MSCI, and ZoomInfo as the only cloud provider that provides grounding with Google search. At the same time, it was stated that application portfolios utilizing AI are useful for acquiring new customers and promoting upsells. He emphasized that over time, cloud and AI will be the driving force for significant growth.
●Tesla
◆ Financial data
AI initiatives for the April-6 fiscal year have progressed. The price of FSD has been lowered in North America, and anyone with the necessary hardware can try it out for free. These programs have been successful and are laying the foundation for more meaningful FSD monetization. As FSD functions improve and awareness of the convenience and safety that FSD provides to users increases, it is expected that the FSD installation rate for our fleet will rise.
◆ Financial data
AI initiatives for the April-6 fiscal year have progressed. The price of FSD has been lowered in North America, and anyone with the necessary hardware can try it out for free. These programs have been successful and are laying the foundation for more meaningful FSD monetization. As FSD functions improve and awareness of the convenience and safety that FSD provides to users increases, it is expected that the FSD installation rate for our fleet will rise.
It was indicated that the launch plan for AI training capabilities is expected to expand after July-September.
◆CEO Elon Musk's comments at the financial results briefing
We are investing in future projects such as AI training. The announcement of RoboTaxi was postponed (8/8 to 10/10) due to improvements and the addition of several things. The timing of deployment of robo-taxis depends on advances in technology and regulatory approval, but since the potential value is so great, we are actively working on this business opportunity. The focus is on generating sufficient cash flow to invest in future growth.
We are investing in future projects such as AI training. The announcement of RoboTaxi was postponed (8/8 to 10/10) due to improvements and the addition of several things. The timing of deployment of robo-taxis depends on advances in technology and regulatory approval, but since the potential value is so great, we are actively working on this business opportunity. The focus is on generating sufficient cash flow to invest in future growth.
The humanoid robot Optimus is already working at our factory, and we plan to begin limited production of Optimus version 1 early next year. The initial products are for our company, and thousands of Optimus robots will be produced by the end of next year, and work will be carried out at Tesla's factory. After that, production is scheduled to be drastically increased in 2026, and Optimus robots will be provided to external customers. I think this will be Optimus version 2.
Based on the above,Alphabet and Tesla intend to continue to expand investment in AISo,Also, I am confident that large profits can be obtained in the medium to long termIt seems like it shows. Note, after both companies' financial results are announced, against both companiesAverage target stock pricewere raised by 1% and 4%, respectively. Can be checked from a Bloomberg deviceInstitutional investors' trading trendsWhen I checked, Alphabet overwhelmingly had many funds that increased their positions during the decline after settlement, and in the case of Tesla, buying and selling intersected.
Incidentally, OpenAI, which developed ChatGPT, declared war on Google and launched SearchGPT. Based on Microsoft's track record of challenging Google with BING equipped with ChatGPT, it is expected that SearchGPT will not greatly threaten Google's superiority in the search market.
Among the SOX index constituent stocks, the leading cutting-edge semiconductor manufacturing equipment company $ASML Holding (ASML.US)$, the largest foundry in the world $Taiwan Semiconductor (TSM.US)$The automotive semiconductor business is the main force $NXP Semiconductors (NXPI.US)$, a major analog semiconductor company $Texas Instruments (TXN.US)$, a major inspection equipment company $KLA Corp (KLAC.US)$, a major semiconductor tester $Teradyne (TER.US)$has finished announcing financial results.
In the meantime,Companies benefiting more from the AI investment boom(For example, companies excluding NXPI and TXN)Financial results are generally strongIt was. Each companyBenefits from investing in AI are expected to continue to expand。
Other than semiconductor companies, technology giants $IBM Corp (IBM.US)$announced strong financial results. Strong demand for AI-related services and software boosted business results. The company's orders for AI consulting and software have exceeded 2 billion dollars since mid-2023.
If you look at it comprehensivelyIt is difficult to say that the turbulence at the beginning of financial results suggests the end of the AI market, and it seems necessary to examine the financial results details of more companies, including Big Tech. If you look only at the financial results of companies that have already announced financial results, there seems to be a high possibility that investment expansion for AI will continue in the future. Trends and prospects for AI-related earnings are slightly weak for some companies, but overall it's not that bad, and there are many companies that are doing rather well. It can be said that expectations for the performance-boosting effects of AI have not collapsed yet.
7/26/24 Market Analyst Amelia
Source: Created by Bloomberg by Moomoo Securities
Source: Created by Bloomberg by Moomoo Securities
Disclaimer: Moomoo Technologies Inc. is providing this content for information and educational use only.
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Mackye : Isn't there any sense of incongruity about seeking results as soon as an investment is made? Analysts, mass media, and market participants all have excellent intelligence and judgment. Certainly, some critics have argued since last year that AI does not transform society and bring big profits like the internet. However, only a small percentage of people say that, and many managers and intellectuals say that AI is a society comparable to the industrial revolution I believe it will bring about dramatic change, and that's why they're making huge investments. Are the business owners investing in AI stupid? There's probably no such thing, and market participants should all know the inevitability of AI investment and that the benefits it brings are enormous but a certain amount of time is required for maturation, yet the fact that the problem that investments do not produce profit is frequently presented is an expression in the category of incitement rather than words from reason, and I'm sorry, I think it's just my impression that I'm moving right and left at the mercy of the market, so there is a mistake in judgment I would appreciate it if you could point it out and teach me
HONDA N-ONE Mackye : Overseas, the idea that companies belong to shareholders is pervasive, so there's no doubt that it's far from Japanese people's senses
かにあるき : Some individual investors are overjoyed by the rise and fall in stock prices.
AI-related matters are still in the future, and it is certain that it will have a major global impact in the future.
That's why I want to invest from a long-term perspective without being caught up in the blink of an eye.
しげるちろ かにあるき : you are right!!