High Expectations for Big Tech: Stellar Performances Met with Scrutiny

📝 SUMMARY: The recent earnings season has put the spotlight on the 'Magnificent Seven' group of tech giants, which have been central to the stock market's growth over the past year. Despite posting strong quarterly results, these tech titans are facing stringent investor scrutiny, with varying market reactions to their earnings reports.

Meta Platforms ($META) reported impressive sales growth, initiating its first dividend and boosting its share-buyback authorization, leading to a 20% surge in its stock. Amazon ($AMZN) also saw a jump in its shares by 7.9% due to soaring profits attributed to robust holiday spending.

However, other tech giants didn't fare as well, even with positive earnings surpassing Wall Street forecasts. Alphabet ($GOOGL), Microsoft ($MSFT), and Apple (AAPL) reported higher profits and sales, but saw their shares decline due to underperformance in key business segments. Alphabet experienced its worst session since October after its report, while Apple's China revenue and services division underperformed. Microsoft's shares dipped following earnings from its Windows, gaming, and device businesses.

This critical response from investors is attributed to the high stakes placed on these companies, particularly their roles in the potential artificial intelligence boom and their significant contributions to the S&P 500's performance. Despite this, tech stocks faced setbacks last week, influenced by waning hopes for near-term Federal Reserve rate cuts and economic indicators like the strong January job report and rising bond yields.

As the tech sector navigates these challenges, the focus shifts to their investments in AI and the potential revenue and profit generation from these ventures. With high valuations to justify, the 'Magnificent Seven' must demonstrate their ability to translate technological advancements into tangible financial growth amidst a dynamic economic landscape.

🔍 SOURCE: https://www.wsj.com/finance/stocks/tech-stocks-earnings-growth-2024-1d7e6873?mod=hp_lead_pos1