The US stock market recently witnessed its first sharp drop in half a year in a broad pullback many Wall Street analysts described as long overdue. After several volatile weeks, the S&P 500 tumbled 5% from its March 28 closing high, marking its biggest retreat since October 2023. The high-flying chip stocks were no exception, with the AI darling Nvidia’s stock seeing a double-digit drop earlier in the week.
However, the hardware technology sector saw some relief in the aftermath of long-awaited earnings reports by Big Tech companies, notably Meta Platforms (NASDAQ:META), Alphabet, and Microsoft (NASDAQ:MSFT).
Shares of Google owner surged over 11% in premarket trading Friday after the company handily topped analyst estimates for the fiscal Q1 2024, with its cloud division displaying significant strength. The company’s revenue jumped 28% year-over-year to $9.6 billion while operating income rose to $900 million.
One of the highlights of the print was Alphabet’s (NASDAQ:GOOGL) capital expenditure (CapEx), which soared to $12 billion during the three-month period. The company’s CFO Ruth Porat expects to see this figure repeated throughout the year.
“Our reported capex in the first quarter was $12 billion, once again driven overwhelmingly by investment in our technical infrastructure with the largest component for servers followed by data centers,” Porat said.
“The significant year-on-year growth in capex in recent quarters reflects our confidence in the opportunities offered by AI across our business,” she added.
Commenting on Alphabet’s robust report, Mizuho analysts said “the big capex beat at $12B vs est $10 will help NVDA and others semi AI / hardware names.”
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Nvidia (NASDAQ:NVDA) stock is up nearly 5% on Friday.
Facebook owner Meta Platforms also raised its forecast for expenses in 2024 in a bid to grow investments in new AI products and the computing infrastructure underpinning them.
The company added that it expected spending would continue to increase in 2025 as well. The social media behemoth, raised its total expense forecast for 2024 to between $96 billion and $99 billion, up from the previous range of $94 billion to $99 billion.
Further, it now anticipates that 2024 capital expenditures will range from $30 billion to $40 billion, a rise from the earlier projection of $35 billion to $37 billion.
Moreover, US stocks have received a fresh boost after a new inflation report, released on Friday, came roughly in line with Wall Street estimates.
