What do Meta, Google parent Alphabet, Amazon and Intel have in common besides being big players in the technology sector? They have all been struggling on the stock market since their latest quarterly reports failed to impress investors.
And they are far from the only companies to have fallen. The tech-heavy Nasdaq Composite Index lost nearly 3 percent on Friday, its worst trading day since June.
One clear factor is that the market's expectations of tech and AI companies have changed in a short time, says Maria Landeborn.
A few years ago, the larger the investments these big American companies made, the more positively they were viewed. But that is no longer the case.
The market has increasingly begun to question whether profitability will be high enough in the future.
Rising interest rates a threat
She also points out that several companies are seeing revenues decline in areas where they have traditionally been strong, even as they ramp up capital spending on data centers and other infrastructure. One example is Alphabet, whose latest report showed record-high investment costs while advertising revenues fell short of expectations.
Another factor, Landeborn says, is that interest rates are rising. The US Federal Reserve and other central banks have signaled that further key interest rate hikes are in the works, which means higher borrowing costs for companies.
It will of course be especially tough for companies that are highly indebted, have weak profitability or depend on the capital market to raise more money to run their businesses.
Historical parallels
Developments in the AI field have led some to draw parallels with the so-called dotcom bubble around the turn of the millennium, which ended in a crash. Maria Landeborn emphasizes that an important difference is that the major players are now well-established and profitable.
If you look back to the turn of the millennium, there were many companies back then that were not profitable at all. All you had to do was change your name to something related to the internet, or rewrite your vision, and you would make money on the internet, and the share price would rise.
But regardless of how relevant the historical parallel is, today's players have a goal to meet, Landeborn emphasizes:
Ultimately, it will be important that the companies that build data centers can also charge their customers.
What do you think?