Danske Research Team describes a weak session for global equities, with the S&P 500 down 0.3% and the Stoxx 600 up 0.8% but tech and communications underperforming. Alphabet fell 13% after disappointing earnings, while Amazon and Intel dropped sharply in aftermarket trading. They note AI capex scepticism likely returning and Asian indices opening lower.

US tech weakness drags global stocks

“Equities were lower on Thursday, with the AI trade swinging back into negative territory. The S&P 500 fell 0.3%, while the Stoxx 600 continued to rise, gaining 0.8%. Tech and communications were among the worst performers, primarily driven by Alphabet selling off no less than 13% following disappointing earnings and negative cash flow. However, it is worth reiterating that it was the core business that missed, not AI revenues.”

“Aftermarket trading just as interesting, as the final one of the hyperscalers, Amazon, reported. However, dynamics were similar to Alphabet, with a miss in the core business and somewhat lowered guidance (only -1% below consensus, though) as Amazon expects weaker consumers into holiday season, primarily due to rising energy prices.”

“The timing is of course unfortunate, with core business weakening all while cash burn accelerated. Except, when it comes to Amazon, the cash burn is in its own league. Free cash flow decreased to an outflow of more than $33bn in Q3 alone. This can be compared to the Q3 EBIT of 17bn, while consensus had expected cash flow to be around breakeven.”

“As a result, the stock is down more than 7% in the aftermarket and AI capex scepticism will likely come back into markets today. This also goes for the hardware side, with Intel down -20% in the aftermarket, again not driven by AI-related revenues but by a slowing PC market following surging memory prices.”

“Asian markets dipped into negative territory this morning, with the Kospi down 4% and the Nikkei 225 down 2.5%. US futures indicate an opening around -1%, and Europe -0.5%.”