Meta’s forecast for lower-than-estimated sales sparks fear in tech world

A disappointing earnings report from Meta Platforms Inc. has technology investors on edge ahead of results from some of the stock market’s biggest and most important companies in the coming days.

Shares of Facebook’s parent were down as much as 19 per cent in after-hours trading and an exchange-traded fund that tracks the tech-heavy Nasdaq 100 Index fell as much as 1 per cent after Meta forecast weaker-than-expected sales in the current quarter while targeting higher capital expenditures.

“While Meta will employ AI in its work, right now it doesn’t seem to be the biggest beneficiary of AI adoption,” said Jack Ablin, chief investment officer at Cresset Wealth Advisors. “The disappointment on the revenue side is overshadowing any optimism about AI. It’s hard to tell what the benefit will be to users, and while AI could ultimately mean some cost savings down the line, that isn’t visible yet.”

Alphabet Inc., which reports earnings on Thursday along with Microsoft Corp., was among the biggest decliners, falling around 3.3 per cent. Amazon.com Inc., which has results due on April 30, dropped more than 2.5 per cent. Social media companies Snap Inc. and Pinterest Inc. each fell more than 6 per cent, while Reddit Inc. slipped 1.8 per cent.  

Meta’s earnings raise questions that go beyond its specific business to the heart of the broader AI investment thesis, according to analysts at Lynx Equity Strategies.

“For all of this attention on AI, why isn’t the company able to beat June expectations,” Lynx analysts KC Rajkumar and Jahanara Ahmed said. “Is the monetization of gen AI on track with management’s expectations?”

Those concerns weighed on the shares of Nvidia Corp., the biggest beneficiary of spending on AI computing. The stock fell more than 2 per cent. Other chipmakers including Micron Technology Inc. and Advanced Micro Devices Inc. also dropped.

Server makers Super Micro Computer Inc. and Dell Technologies Inc. fell more than 3 per cent, while software maker Palantir Technologies Inc. dropped 2 per cent.

Elsewhere in technology, International Business Machines Corp. and software maker ServiceNow Inc. added to the gloom as their shares slumped 8.5 per cent and 5.5 per cent, respectively, after their own earnings reports. 

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