Don’t rely on the forthcoming tech stocks reports (tonight Amazon, Alphabet, Intel, Snap, Twitter) and Facebook and Apple next week, to steady the ship on Wall Street. At best they might force investors to think again if the numbers are above estimates.
But such is the change in investor sentiment that more and more tech companies are not making encouraging quarterly reports – there are holes and shortfalls from forecasts that are hurting confidence. Earlier this week Texas Instruments noted a slowdown in chip sales across the sector, which sent ripples through share prices of a wide range of companies. The shares fell 8% on Wednesday in reaction.
On Wednesday after hours, the shares of another big chipmaker, Advanced Micro Devices (AMD) slumped 22% (24% at one stage) after it fell short of market forecasts. That slide was after a 9% slump in regular trading, meaning a third of the company’s value could be wiped out if the after-hours fall is continued into regular trading on Thursday.
It’s not that AMD had a poor quarter – revenue rose to $US1.65 billion from $1.58 billion in the same quarter of 2017 but that was just short of the $US1.7 billion in market forecasts. But AMD’s major product is sales of chips for graphics and there they fell well short of forecasts – $US938 million against forecasts of $US1.05 billion. Sales of other chips were above market forecasts
The 4th quarter sales estimate of a range of $US1.4 billion to $US1.5 billion was short of analysts expectations of $US1.6 billion. And net profit of $USS102 million, or 9 cents a share, compared with $US61 million, or 6 cents a share. Adjusted earnings were 13 cents a share. Analysts had been expecting between 12 and 15 cents a share.
In normal market conditions, AMD would not have seen such a violent fall in its share price but investors are now becoming very nervous about tech valuations and any miss in revenues, earnings or other key forecasts will provoke a rapid revaluation – usually downwards.
Any tech company that does better won’t see its shares surge simply because sentiment has become more cautious.
Amazon’s report tomorrow and then Apple’s next week will be the key tests for sentiment.
