The US financial results season has begun! Can Big Tech meet growing expectations? Is the AI boom over yet?
$S&P 500 Index(.SPX.US$But17% increase since the beginning of this yearAlso, while it has reached a peak after the peak due to the enthusiasm sparked by big tech and artificial intelligence (AI), the financial results season starting this week in the US will be a yardstick for investors and analysts to check corporate growth.
July 12, $JPMorgan(JPM.US$、 $Citigroup(C.US$Financial results of major banks, etc. were announced, and the second quarter financial season for US stocks began. Next, $Netflix(NFLX.US$with $Taiwan Semiconductor(TSM.US$on Thursday this week, $Tesla(TSLA.US$、 $Alphabet-A(GOOGL.US$、 $Meta Platforms(META.US$It is scheduled to announce financial results on 7/23.
For a market that has witnessed that the Federal Reserve (Fed) is not rushing to cut interest rates and continues to scrutinize growth, inflation, and labor market data,There is a possibility that corporate financial results will be a catalyst for the second half of this yearThere is.
July 12, $JPMorgan(JPM.US$、 $Citigroup(C.US$Financial results of major banks, etc. were announced, and the second quarter financial season for US stocks began. Next, $Netflix(NFLX.US$with $Taiwan Semiconductor(TSM.US$on Thursday this week, $Tesla(TSLA.US$、 $Alphabet-A(GOOGL.US$、 $Meta Platforms(META.US$It is scheduled to announce financial results on 7/23.
For a market that has witnessed that the Federal Reserve (Fed) is not rushing to cut interest rates and continues to scrutinize growth, inflation, and labor market data,There is a possibility that corporate financial results will be a catalyst for the second half of this yearThere is.
According to LSEG data,Second-quarter earnings for S&P 500 stocks increased 10.1% from the same period last yearThen, it is expected to accelerate from the 8.2% increase in the first quarter. The profit growth rate of the S&P 500 constituent stocks has been improving since it declined in the 2nd quarter of 2023 compared to the same period last year, but this is mainlyOptimism about big tech growth and artificial intelligenceIt is due to
Analysts usually revise corporate earnings forecasts downward as the financial season approaches. According to FactSet, while the average for the past 5 years was 3.4%, this fiscal year it was only reduced by 0.5%.
At the same time,S&P hit a record high due to the high-tech rally, and valuation went from 19 times the expected profit in January to over 21 timesand it has risen.
These benefits are $NVIDIA(NVDA.US$、 $Apple(AAPL.US$、 $Microsoft(MSFT.US$、 $Amazon(AMZN.US$It is heavily dependent on the five giant Meta companies, and its stock price-earnings ratio has expanded much more rapidly from 28 times the forecast to an average of 34 times. NVIDIA's ratio increased from 24 times in January to 41 times in line with rising demand predictions for artificial intelligence-related chips.
Quarterly earnings of AI chip maker NVIDIA are expected to exceed expectations, and Microsoft expects intelligent cloud revenue to almost exceed Wall Street targets in April.
Peter Tuz, president of Chase Investment Counsel in Charlottesville, Virginia, pointed out that the earnings forecasts for AI-related companies are rising and said “we are entering an optimistic fiscal season.”
However, according to Deutsche Bank's forecast,Big Tech's profit growth rate is expected to slow and fall from 38% in the previous quarter to an average of 30% compared to the same period last year for the three months to JuneIt's been done.
Earnings growth is the basic reason for the long-term rise in tech stocksThere is also a view that it is. Although earnings are still growing, it is said that the growth rate will slow down, especially for market-leading companies such as NVIDIA.
“What is expected is that the gap between other markets and tech giants will shrink, that is, earnings will expand, and as we look ahead to the next few quarters, the earnings of major tech companies will moderate,” sees Supriya Menon, who is responsible for multi-asset strategy at Wellington Management.
Bank of America analyst Savita Subramanian agreed with this view.
“The 493 other S&P 500 companies are expected to see earnings per share increase in the second quarter for the first time since the fourth quarter of 2022, but growth in “Mag 7” has slowed for 2 consecutive quarters and is expected to grow further in the 3rd quarter. Revenue growth is expanding, and so should the market,” he said.
According to the bank, one of the reasons why “Mag7” recovered faster than the other 493 companies is that major high-tech companies first entered a decline in business performance in the latter half of 2022. due to this recessionHigh-tech companies cut costs faster than other companies, and as a result, recover fasterIt's connected.
Analysts areWhat supports the further rise in the market is expected to be a recovery in the performance of other American companiesDoing it. However, due to the importance of big tech, there is also a view that even if the performance of major companies in other sectors exceeds expectations, it is not enough to offset the impact that the daily movements of big tech have on the market.
According to factset data, earnings in the high-tech sector are expected to grow at an annual rate of 15% over the next 2 years as the introduction of AI becomes established and corporate spending on advanced software and chips increases.
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Is the AI boom far from over?
Artificial intelligence will continue to attract attentionSeemingly. As the expansion of business performance of large stocks slows down, attention is being paid to how companies such as public works and data centers invest money into AI, and whether such investments will boost stock price evaluations.
Goldman Sachs strategists Ryan Hammond and David Costin said, “Artificial intelligence deals are getting more and more attention. Investors are intensifying their concerns about what kind of returns can be expected by large companies such as Amazon, Meta, Microsoft, and Alphabet investing in AI,” he pointed out.
Who is a Goldman Sachs strategistIt suggests a correction in sales as an important indicator showing the sustainability of AI tradingI did it.
According to Bank of America, the four big tech companies Microsoft, Amazon, Google, and Meta2024 will be the first year of the multi-year AI investment cycleIt is said that they have confirmed the previous quarter's opinion. In the financial results season for the first quarter, the consensus forecast for the capital investment amount of the four companies for 2024 was approximately 200 billion dollars, an increase of 18 billion dollars, an increase of 34% from the same period last year.
According to factset data, earnings in the high-tech sector are expected to grow at an annual rate of 15% over the next 2 years as the introduction of AI becomes established and corporate spending on advanced software and chips increases.
Artificial intelligence will continue to attract attentionSeemingly. As the expansion of business performance of large stocks slows down, attention is being paid to how companies such as public works and data centers invest money into AI, and whether such investments will boost stock price evaluations.
Goldman Sachs strategists Ryan Hammond and David Costin said, “Artificial intelligence deals are getting more and more attention. Investors are intensifying their concerns about what kind of returns can be expected by large companies such as Amazon, Meta, Microsoft, and Alphabet investing in AI,” he pointed out.
Who is a Goldman Sachs strategistIt suggests a correction in sales as an important indicator showing the sustainability of AI tradingI did it.
According to Bank of America, the four big tech companies Microsoft, Amazon, Google, and Meta2024 will be the first year of the multi-year AI investment cycleIt is said that they have confirmed the previous quarter's opinion. In the financial results season for the first quarter, the consensus forecast for the capital investment amount of the four companies for 2024 was approximately 200 billion dollars, an increase of 18 billion dollars, an increase of 34% from the same period last year.
1) $Netflix(NFLX.US$announced strong financial results for the first quarter in April, which exceeded analysts' expectations.
Analysts anticipate that similar results will come out in the second quarter financial results to be announced after Thursday closes. Wall Street isNet sales of 9.533 billion dollars (up 16.44% from the same period last year) and profit per share of 4.74 dollars (up 44.17% from the same period) are expectedDoing it.
Argus Research analyst Joseph Bonner recently “bought” Netflix ratings again and raised the target stock price for telecommunications services stocks from $660 to $767.
The new target stock price suggests an increase of close to 18% from the current level, which means that the company will enter more deeply into live events and sports programs due to the agreement with Netflix recently announced by the company. This is “very attractive to advertisers for a new ad subscription layer with lower prices,” and Bonner says it should help promote earnings.
2) The market is currently $Taiwan Semiconductor(TSM.US$Sales for the second quarter of will increase 36% from the same period last year, and it is expected that it will be the fastest growth rate after the fourth quarter of 2022.
Amid a strong bullish mood, TSMC's stock price continued to hit an all-time high in the US stock market where it dawned overnight, and the company's total market value reached 1 trillion dollars at one point.
Over the long term, it is predicted that TSMC's full-year sales in dollars will grow by about 27% in 2024 against the backdrop of strong growth in AI chip manufacturing related earnings, development of next-generation AI, and increased adoption of N3 nodes by customers other than Apple, etc., and it is predicted that TSMC's full-year sales in dollars will grow by about 27% in 2025.
[US Stocks] This Week's Notable Earnings
① July 15 (Monday), $Goldman Sachs(GS.US$ Before leaning in
② 7/16 (Tue), $Bank of America(BAC.US$、 $Morgan Stanley(MS.US$ Before leaning in
③ July 17 (Wed), $ASML Holding(ASML.US$ After drawing
④ 7/18 (Thursday), $Taiwan Semiconductor(TSM.US$ Before leaning in
⑤ 7/18 (Thursday), $Netflix(NFLX.US$ After drawing
⑥ July 19 (Friday), $American Express(AXP.US$ Before leaning in
Source: BofA US Equity & Quant Strategy, Factset, Bloomberg, Reuters, Moomoo
ー MooMoo News Evelyn
This article uses automatic translation for some of its parts
ー MooMoo News Evelyn
This article uses automatic translation for some of its parts
Disclaimer: Moomoo Technologies Inc. is providing this content for information and educational use only.
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