As a barometer of the US stock market, the every move of technology giants has attracted much attention. From the disclosed first quarter results, Microsoft and Google's parent companies Alphabet and Meta, among the "Big Seven", performed well, with basic performance indicators such as revenue and net profit increasing year-on-year; Tesla has performed poorly, with both revenue and net profit declining, and a crisis in free cash flow.
AI becomes a revenue generating tool
Benefiting from the growth in advertising and cloud business revenue, Alphabet's performance in the first quarter of this year far exceeded expectations: revenue of $80.539 billion, a year-on-year increase of 15%; Net profit increased by 57% year-on-year to $23.66 billion, exceeding expectations of $18.95 billion.
The cloud business is seen by the market as Google's new growth engine, with revenue increasing by 28.4% year-on-year in the first quarter to $9.57 billion. The core advertising business also lived up to expectations, with a total revenue of $61.66 billion. Among them, Google's search and other advertising revenue was $46.156 billion, and YouTube's advertising revenue was $8.09 billion.
Alphabet CEO Sundar Pichai stated that the search, YouTube, and cloud computing sectors have performed strongly. With its leading position in artificial intelligence research, infrastructure, and extensive coverage of global products, Google is expected to have a favorable position in the next wave of AI.
Alphabet also announced its first cash dividend plan, with a payout of $0.2 per share; In addition, Alphabet's board of directors has authorized an additional repurchase of Class A and Class C stocks not exceeding $70 billion.
On the first trading day after the financial report was released, Alphabet's stock price surged by over 10%. Wells Fargo Bank has raised its target price from $141 to $168.
AI has also become a revenue generating tool for Microsoft. Boosted by the demand for cloud computing and artificial intelligence products from corporate clients, Microsoft's third quarter performance report for the fiscal year ended March 31, 2024 showed a 17% increase in revenue to $61.9 billion and a 20% increase in net profit to $21.94 billion.
Among them, Microsoft's cloud revenue increased by 23% year-on-year to $35.1 billion, and the growth rate of AI related businesses increased by 7 percentage points.
In the first quarter, Meta achieved a revenue of 36.455 billion US dollars, a year-on-year increase of 27%; The net profit was 12.369 billion US dollars, a year-on-year increase of 117%.
Although Microsoft, Alphabet, and Meta can all be considered "top performers" in terms of business performance, the market is very sensitive to potential crises of each company, and the stock prices of these companies have shown significant differentiation after the financial reports are released.
Meta expects the company's revenue to be between 36.5-39 billion US dollars in the second quarter, a year-on-year increase of 18%, lower than the market's expected 20% growth rate.
The CEO Zuckerberg's speech has made investors even more concerned. He said, "It will take a long time for investment in AI to yield returns."
On the trading day after the financial report was released, Meta's stock price plummeted by over 10%.
Since 2024, Tesla's situation seems to have become increasingly difficult. Affected by multiple factors such as the first quarter performance and delivery volume not meeting expectations, global layoffs of 10%, and price reduction promotions, the stock has fallen by 32% this year, and market concerns about its prospects continue to intensify.
Specifically, in terms of financial reports, Tesla achieved a revenue of $21.3 billion in the first quarter, a year-on-year decrease of 9%, marking the first year-on-year decline in revenue since 2020; Net profit of 1.129 billion US dollars, a year-on-year decrease of 55%; The adjusted earnings per share were $0.45, which did not meet market expectations.
Investors are also paying attention to Tesla's gross profit margin and free cash flow situation. In the first quarter, Tesla's gross profit margin was 17.4%, a year-on-year decrease of 199 basis points, and free cash flow was negative. Tesla attributed it to a backlog of $2.7 billion in inventory and an investment of $1 billion in AI infrastructure construction.
Perhaps to salvage the impact of poor performance in the first quarter, Tesla announced the upcoming launch of more affordable models. The company's CEO Elon Musk stated that the new model can be launched on the market as early as the end of this year. In addition, Musk also announced the sale of the humanoid robot Optimus (Optimus Prime) by the end of 2025.
Tesla's stock price immediately improved, and on the trading day after the performance announcement, the stock price rose by more than 12%.
Aggravated debate over multiple options
The AI wave sparked by technology giants has reached today, and the strategic layout and market performance of various companies have shown significant differentiation. The "Big Seven" seem to have come to a crossroads of reshuffling, with Nvidia, Meta, Microsoft, and Amazon's stock prices rising rapidly in the first quarter, outperforming the overall market and being known as the "Fab Four" in the market.
However, at the same time, the market's divergence towards the future of the technology sector is gradually increasing, and the debate between long and short positions is intensifying.
A positive perspective is firm in "buying" AI. Goldman Sachs believes that the current stock market is in the first stage of an AI led technology boom, and the impact will continue to expand, boosting more and more industries.
Puyin International believes that the rapid development of global artificial intelligence is accelerating towards the era of General Artificial Intelligence (AGI). Artificial intelligence is one of the most noteworthy investment directions in the next decade, and AI+will gradually penetrate and reshape most industries, with a vast market space.
According to a research report by CITIC Securities, according to Bloomberg's forecast, the profit forecast growth rates for the S&P 500 and Nasdaq 100 indexes in 2024 are 9.1% and 13.5%, respectively, and the revenue forecast growth rates are 2.9% and 7.7%, respectively. The fundamentals of US technology stocks will continue to strengthen.
"The profit share of the 'Big Seven' in the S&P 500 index has increased from 20.1% in 2023 to 21.4%, and investors are still optimistic about the profit performance and support of technology leaders this year." CITIC Securities said.
Some market insiders also believe that the profit momentum of technology giants is weakening. UBS Group's Chief US Equity Strategist stated that the upward momentum of US tech giants is disappearing, and the ratings of the six major US tech giants, Alphabet, Apple, Amazon, Meta, Microsoft, and Nvidia, have been adjusted from "high-end" to "neutral".
He believes that as profit momentum cools, large technology companies are losing momentum. But he emphasized that the downgrade was not due to increased valuations or doubts about artificial intelligence technology, but rather to the severe competitive environment and cyclical pressures faced by these stocks.
Jeremy Grantham, co-founder and chief investment strategist of asset management company GMO, has previously stated that US stock prices are absurdly high and are likely to be in trouble. Now the concept of artificial intelligence, which is wildly hyped by the market, is a "foam destined to burst".