The performance of Big Tech stocks following their results diverged this week, with clear winners and laggards emerging as Wall Street looks for clear signs of returns on AI investments to determine the market leaders.
Shares of Meta (META) rose more than 10% in one day as investors celebrated productivity gains and the integration of AI into the company’s social media apps, advertising and shopping tools, and internal workflows.
Meanwhile, Tesla (TSLA) shares rebounded on Friday after selling off as investors weighed a massive spending forecast after Elon Musk underscored the company’s transition from an electric vehicle maker to autonomous driving and robotics.
And shares of tech giant Microsoft (MSFT) took a hit following its results amid concerns about slowing cloud growth and massive AI-related spending. Shares of cloud software leaders Salesforce (CRM) and ServiceNow (NOW) also fell on concerns that AI could disrupt the software-as-a-service model.
“It all comes down to monetization. That’s what people want to see here,” Wedbush Securities CEO and global head of technology research Dan Ives told Yahoo Finance on Friday.
“I think what we’re seeing is really a bifurcation in technology. It’s the haves and the have-nots, and that’s really what’s happening in technology gains,” he added.
The market has been wary of an AI bubble in recent quarters and wants to see the billions of dollars invested by companies in the technology paying off in their bottom lines.
“Investors are voting with their feet and are entering sectors where growth is more obvious and they feel there is durability,” said Wolfe Research CEO and head of software research Alex Zukin.
Still, Wall Street calls the recent selloff in software stocks overblown, arguing that the benefits of AI will take longer to materialize.
“There is a lot more complexity associated with enterprise, data, governance, security, compliance, risk, and we believe that some of these trends and themes may develop over a longer period of time,” he said, adding: “We are still in phase zero of adoption.”
The analyst sees buying opportunities in data platform companies like MongoDB (MDB), data storage providers like Snowflake (SNOW), observability providers like Datadog (DDOG), and communications platform companies like Twilio (TWLO), all of which have declined in sympathy with broader weakness in software stocks.
One clear theme is on the right track: the strong demand for memory and storage for AI.
