Once considered incapable of doing anything wrong, tech superstars such as Alphabet are now shocking investors with news that growth can slow, and that they are susceptible to headwinds like any other business.
It’s put the fear into investors holding these stocks that the current reporting season will contain a mixed bag of news from the sector, hence the big sell-off in the tech-heavy Nasdaq index on Tuesday.
A key reason why Alphabet’s share price fell was a slowdown in YouTube’s advertising growth quarter-on-quarter. YouTube has recently been one of the big earnings drivers for the group with millions of people now treating it as a priority destination for content.
“Microsoft’s results beat expectations across all the key metrics, but its shares still slipped. Fundamentally a good stock will struggle if a sector is out of favour, whereas bad stocks can thrive if a sector is in favour,” said AJ Bell’s Russ Mould.
“Apple, Amazon and Meta are next to report their earnings and investors seems to be braced for potential bad news. Apple and Amazon are heavily reliant on consumer spending and the current cost of living crisis has cast a dark cloud over how much money the public has spare to splash on non-essential items. Meta is heavily reliant on advertising spend so if YouTube is seeing weakness, it too might be suffering.
“Also weighing on the Nasdaq was a decline in Tesla where the market fears Elon Musk might have to sell some of his stock to help finance his takeover of Twitter.”