Jul 25, 2024 07:32 AM IST
Stock indexes plummet on profit reports from Tesla and Alphabet, raising investor concerns.
A wipeout on Wednesday sent U.S. stock indexes to their worst losses since 2022 after profit reports from Tesla and Alphabet helped suck momentum from Wall Street’s frenzy around artificial-intelligence technology.
The S&P 500 tumbled 2.3% for its fifth drop in the last six days. The Dow Jones Industrial Average dropped 504 points, or 1.2%, and the Nasdaq composite skidded 3.6%.
The profit reports from Tesla and Alphabet weren’t disasters, but they raised questions among investors about which other market heavyweights’ springtime results could fall short of expectations, said Sam Stovall, chief investment strategist at CFRA.
“How many disappointments are we likely to see? Maybe let’s sell first and ask questions later.”
Tesla was one of the heaviest weights on the market and tumbled 12.3% after reporting a 45% drop in profit for the spring, and its earnings fell short of analysts’ forecasts.
Tesla has become one of Wall Street’s most valuable companies not just because of its electric vehicles but also because of its AI initiatives, such as a robotaxi. That’s a tough business to assign a value to, according to UBS analysts led by Joseph Spak, and the “challenge is that the time frame, and probability of success is not clear.”
At Alphabet, meanwhile, investors’ patience with the company’s big AI investments may also be running thinner.
Alphabet dropped 5% even though it delivered better profit and revenue for the latest quarter than expected. Analysts pointed to some pockets of weakness underneath the surface, including weaker growth in advertising revenue for YouTube than expected. They also said increased AI investments and other spending could crimp how much cash it generates.
The larger challenge for Alphabet may have simply been how much its stock has already rallied, nearly 50% in the 12 months through Tuesday, on expectations for continual growth.
