Key facts
- The Nasdaq Composite opened higher on Friday, boosted by Amazon's strong cloud revenue growth.
- Amazon shares surged over 15% following its quarterly report.
- Apple shares declined after warning of supply constraints affecting growth.
- Investors are evaluating the returns on AI investments and their impact on cash flow.
- The Philadelphia Semiconductor index is poised for its largest monthly decline since late 2008.
The Nasdaq Composite opened higher on Friday, with Amazon shares jumping significantly after reporting strong cloud revenue growth. This performance eased concerns about artificial intelligence investment returns that had driven volatility in July. Apple's shares dropped premarket after warning that supply constraints would hurt growth, prompting investors to look beyond near-term shortages to gauge the impact of an expected iPhone price hike.
Analysts described the week as 'make-or-break' for the tech sector, which had seen investors taking profits in July after a strong second quarter. Amazon's results followed similar reports from Microsoft and Alphabet, which also logged significant drops in cash flows. "It is no longer enough to beat overall estimates; companies must also reassure investors about the drivers of future growth," said John Plassard, head of investment strategy at Cité Gestion. "Ultimately, Amazon confirms that the momentum in artificial intelligence continues to support the hyperscalers, while Apple reminds us that its main challenge now remains accelerating its AI strategy while sustainably reviving its growth in China."
Shares of Microsoft dipped, Alphabet added, Meta advanced, and Tesla rose. Chip stocks Nvidia climbed and Micron gained. Dow E-minis were up and S&P 500 E-minis were up.
All three major Wall Street indexes are on track for weekly gains, but are set for monthly losses due to a sharp selloff in AI-linked stocks through July. The Philadelphia Semiconductor index is down over 20% in July, its biggest monthly fall since late 2008. The S&P 500 equally weighted index, however, is on track for its fourth-straight month of gains.
"This momentum crash was tremendous and the positioning has been rinsed," said Laurent Clavel, global head of multi-asset at AXA Investment Managers at BNP Paribas Asset Management. "Going into August, if anything, we are going back into it slowly. We're buying this weakness and we're re-buying this AI narrative."
The Federal Reserve left interest rates unchanged this week, leading investors to price in a 36.8% chance of unchanged rates in September.