Wall Street braced for a lower open on Wednesday morning as shares of tech giants Alphabet and Advanced Micro Devices (AMD) took a hit following their earnings reports. Alphabet's earnings report, considered a bombshell, revealed that the company needs to allocate $75 billion for cloud and data center expenditures by 2025, exceeding previous expectations. Meanwhile, Nvidia and Broadcom brought positive news to the table, with Broadcom securing its position as a key supplier of Tensor Processing Units (TPUs) for Google.
Despite the negative outlook at the start of trading, the Dow, S&P 500, and Nasdaq all reported gains on Tuesday. In addition to tech sector fluctuations, broader economic indicators showed bond yields dipping on Wednesday morning. Gold reached a record high, signaling increased investor interest in safe-haven assets amid market volatility, while oil prices declined by 1%.
Shares of Alphabet fell sharply after revealing its substantial future spending plans. The allocation of $75 billion towards cloud and data center infrastructure represents a significant increase from prior estimates, raising concerns among investors about the company's future cash flow and profitability. Furthermore, apprehensions about reduced AI chip demand from Chinese startup DeepSeek have been deemed a minor distraction amidst the earnings revelations.
Advanced Micro Devices also experienced a decline in share value post-earnings report. The market's reaction underscores the sensitivity of tech stocks to earnings announcements and forward-looking financial commitments. Conversely, Nvidia and Broadcom offered some relief with favorable news, hinting at potential growth opportunities in their respective sectors.
Broadcom's confirmation as a TPU supplier for Google stands out as a strategic win, positioning the company to capitalize on growing demand within the tech industry. This positive development contributes to market optimism regarding Broadcom's future performance, despite broader economic uncertainties.