Delving into the "demonstrate the financial rewards" segment.
In what some analysts are referring to as the "show me the fruits of your labor" quarter, many prominent American tech companies are anticipated to announce their earnings during Halloween week. Alphabet, the company behind Google, will lead off on Tuesday, followed by Microsoft and Meta on Wednesday. The week culminates on Halloween itself, with Apple and Amazon revealing their third-quarter results. Nvidia, on the other hand, will report closer to Thanksgiving, on November 20th.
As stated by David Laut, chief investment officer at Abound Financial, "Tech companies have been throwing money at AI like kids in a candy store." Now, investors are eager to see if their investments are yielding any returns.
The earnings season for tech began on a high note on Wednesday evening, with Tesla surpassing expectations with its profits. Tesla managed to decrease the cost of manufacturing each car by $2,400 compared to the previous year, despite engaging in a price war with competitors. This led to a surge of over 11% in Tesla's shares after hours, potentially setting a positive tone for the upcoming tech earnings reports.
However, the stakes are high for the remaining companies in the "magnificent seven." Nvidia, a company known for producing chips that drive the AI boom, has a market value greater than the entire stock markets of Canada and France.
The pressure is especially heavy on Google and Microsoft, both competing for dominance in the AI sector. Google needs to demonstrate that its AI tools are attracting paying business clients, while Microsoft is striving to prove that its collaboration with ChatGPT's creator, OpenAI, is generating revenue.
Meta is counting on AI to boost its struggling advertising business, while Amazon is trying to convince investors that AI is fueling growth in the cloud.
Yet, there are other factors causing anxiety on Wall Street. The upcoming Federal Reserve meeting and its potential interest rate hikes are causing concern, as is the growing tension between political candidates and the close presidential election. Deutsche Bank's Jim Reid wrote, "Perhaps the long-awaited pre-election sell-off is finally happening, despite six consecutive weeks of rallying."
The outcomes of the upcoming tech earnings reports could significantly impact the performance of tech-heavy portfolios. If tech companies can convincingly demonstrate that AI is generating profits, these portfolios may continue to thrive. However, if AI proves to be more of a trick than a treat, these portfolios may struggle.
By Halloween night, as children go door-to-door for treats, investors will have a clearer understanding of whether Big Tech's massive bet on AI is finally starting to yield returns or if, like a Halloween prank, the promise of artificial intelligence ultimately falls short.
Investors are eager to see if the tech companies' investments in AI are yielding any returns, as they closely watch the upcoming earnings reports from these companies. Given Nvidia's substantial market value and its role in driving the AI boom, its financial results are crucial in demonstrating the potential of AI in generating profits for businesses.
