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Big Tech stocks surged on Friday following strong results from Amazon and Meta, with the Facebook owner recording the biggest-ever one-day increase in a company’s market value.
The social media group closed 20.3 per cent higher — boosting its market capitalisation by $197bn to $1.2tn, according to Bloomberg — after its fourth-quarter sales and outlook exceeded forecasts, alongside the surprise introduction of its first-ever quarterly dividend.
Meta’s move eclipsed previous records that saw Amazon and Apple each jump about $190bn in a single day in 2022.
Amazon shares closed 7.9 per cent higher after reporting bumper holiday retail sales, adding about $135bn to its market value.
Earnings reports on Thursday from Amazon and Meta bolstered Wall Street’s confidence that Big Tech companies can deliver further profitable growth while continuing to spend billions on artificial intelligence, after the pair slashed thousands of jobs last year to streamline operations.
Nvidia, which has become the go-to chipmaker for AI developers, rose 5 per cent on Friday after Meta and Apple indicated their commitment to investing more in AI this year, taking its market value to $1.6tn.
However, the gains come at the end of a mixed week for tech earnings reports that saw Apple and Alphabet disappoint investors.
The broad S&P 500 gained 1.1 per cent to set a record closing high while the tech-heavy Nasdaq Composite index climbed 1.5 per cent.
Even as the sector’s latest quarterly numbers failed to demonstrate the anticipated explosion in AI-driven revenues at Microsoft, Amazon and Google, a renewed focus on operational efficiency and capital returns helped sustain investors’ interest after a record end to 2023 for the “Magnificent Seven” stocks.
Meta’s gains came despite the company increasing its projections for capital expenditure this year as it continues to pour billions into AI and metaverse technology. Mark Zuckerberg, chief executive of Facebook’s parent company, told investors he had a newfound appreciation for efficiency after cutting thousands of jobs last year.
“I feel like I’ve really come around to thinking that we operate better as a leaner company,” he said, adding that headcount increases would be “relatively minimal” even beyond this year.
Amazon’s chief executive Andy Jassy said AI revenues would reach “tens of billions” in future, helping the company’s stock to further gains even after rising about 50 per cent over the past year.
However, Apple’s shares fell 0.5 per cent as its latest results confirmed investors’ fears about a slowdown in China, despite a promise from chief executive Tim Cook that it would launch new AI features later this year. Alphabet’s shares had fallen 7 per cent on Wednesday after Google’s advertising revenues failed to show the benefit of its latest AI innovations. Shares in Alphabet gained 0.9 per cent.
“We’re starting to see the Magnificent Seven diverge. Who knows, we could have a magnificent three or magnificent four by the end of the year,” said Anthi Tsouvali, multi-asset strategist at State Street Global Markets. “They’re not all going to do as well [in 2024] as they did last year.”
Concerns last year over inflation and the path of US interest rates meant investors poured cash into haven money market funds and “safe and secure” Big Tech stocks with strong balance sheets, “safe in the knowledge that they were investing in companies which are almost guaranteed to do well”, said Seema Shah, chief global strategist at Principal Asset Management.
“The Magnificent Seven aren’t going to be decrowned anytime soon, but they’re also unlikely to do quite as well in 2024 as they did in 2023,” Shah said.
