AI Could Derail Tech Earnings

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New AI investments threaten the “year of efficiency” margin improvements that Meta Platforms and other tech firms have touted for much of the last year.

Tech stocks came out of the gate roaring in 2023, with the Nasdaq Composite rallying 32% over the year’s first six months. But the group’s momentum is gone, with the same index down 1% since June 30.

Those AI investments now threaten the “year of efficiency” margin improvements that Meta Platforms and other tech firms have been touting. It’s all unfolding amid new worries about the near-term prospects for corporate IT spending.Pressing Pause: Netflix kicks off the earnings parade Wednesday.

“After a few quarters of improvements, spending trends were weaker than previously seen and IT budgets have been further pressured. That likely sets up for relatively capped ‘24 spending,” Fish writes in a research note. We’ll get some IT spending clues when IBM reports later this month.

 

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