US Mega-Caps Dominate this Week’s Earnings Calendar

Mega Caps Earnings

The earnings season is in full swing in the US, with Netflix and Tesla Motors Inc having kicked things off for the tech sector, in a mixed fashion. The streaming leader impressed with an acceleration in revenue and subscriber growth. The EV king on the other hand disappointed, with another hit to its margins due price cuts and weak demand, while Mr Musk gloomy commentary did not help. [1]

Focus now shifts to Mega-Caps, a designation typically referring to companies with market capitalization in excess of $200 billion. Microsoft and Alphabet are the first to report on Tuesday, from a group of companies that are at the forefront of the Artificial Intelligence revolution.

The two tech giants have emerged as main contenders in the AI space. Microsoft has the first-mover advantage and has already and has already started charging corporations for the use of AI-powered versions of popular apps [2]. Alphabet made a slow start, but has picked up speed and the search-engine dominance does not appear to be under immediate threat. None of them however, has managed so far to turn AI into a key revenue and profit driver, the way NVIDIA has.

Meta Platforms picks up the baton on Wednesday, heading into the report from a position of strength. It has refocused on Artificial Intelligence and recently launched a series of AI products and services. At the same time, its financials have improved vastly, returning to double-digits revenue growth in Q2. Markets like what they and its stock rallied around 150% in the first nine months of the year. However, challenges still lie ahead, including regulatory headwinds.

Amazon.com rounds things off on Thursday, with the wind in its sails form the blockbuster Q2 results. Its profits surged to the highest in more than a year and sales expanded by double digits, helped by the cost-cutting measures and July strong Prime Day. On the other hand, its cloud business continued to decelerate and its market share has been stagnant, as key rivals expand their footprint. It also faces a potentially existential threat, from the anti-trust lawsuit brought by the FTC against it. On the critical artificial intelligence front, the tech giants initially seemed to be taking a back seat, but stepped up its game with its stake in Anthropic.

The tech sector comes from a difficult third quarter, as the Fed's hawkish bias stifled the AI blaze and NAS100 lost nearly 3% during that period. Sino-Western trade disputes pose another headwind that undermines the AI boom. The US announced new restrictions of AI chips to China, as it tries to reassert its semiconductor supremacy. [3]

The results of these mega-caps can affect market sentiment and the trajectory of Wall Street. Investors are also looking forward for legacy auto giants like General Motors and the Ford Motor Company. Their figures and guidance could be crucial in the ongoing worker strikes and negotiations with UAW.

Nikos Tzabouras

Senior Financial Editorial Writer

Nikos Tzabouras is a graduate of the Department of International & European Economic Studies at the Athens University of Economics and Business. He has a long time presence at FXCM, as he joined the company in 2011. He has served from multiple positions, but specializes in financial market analysis and commentary.

With his educational background in international relations, he emphasizes not only on Technical Analysis but also in Fundamental Analysis and Geopolitics – which have been having increasing impact on financial markets. He has longtime experience in market analysis and as a host of educational trading courses via online and in-person sessions and conferences.

References

1

Retrieved 23 Oct 2023 https://digitalassets.tesla.com/tesla-contents/image/upload/IR/TSLA-Q3-2023-Update-3.pdf

2

Retrieved 23 Oct 2023 https://blogs.microsoft.com/blog/2023/07/18/furthering-our-ai-ambitions-announcing-bing-chat-enterprise-and-microsoft-365-copilot-pricing/

3

Retrieved 21 Apr 2024 https://www.bis.doc.gov/index.php/documents/about-bis/newsroom/press-releases/3355-2023-10-17-bis-press-release-acs-and-sme-rules-final-js/file

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