Around £130bn was wiped off the value of two of the world’s biggest technology companies as they struggled to meet Wall Street’s sky- high expectations.
Google owner Alphabet’s shares dropped 6 per cent after investors were disappointed by weak advertising performance in the last quarter.
This slashed its value by almost £100billion. Microsoft fell around 1 per cent, a dent of some £30billion in its hefty market cap.
Both have rallied in recent months as excitement grows over artificial intelligence (AI) and its capability to transform Silicon Valley – and the rest of the world.
Microsoft has often been regarded as at the forefront of AI, with its early investment in ChatGPT maker Open AI.
Spooked: Google owner Alphabet saw shares drop over 6% after investors were left disappointed by weak advertising performance last quarter
And Alphabet has been investing in AI to embed in products, such as Google Search.
But shares took a turn this week after the pair posted seemingly positive quarterly earnings.
Alphabet reported its fastest-growing quarter of revenue growth since early 2022 with sales of £67.7billion for the three months to the end of December – up 13 per cent from a year before, boosted by its cloud computing arm.
But advertising remained a sore point, with fierce competition from platforms such as Facebook, TikTok and Amazon, and a tough economic backdrop.
Thomas Monteiro, analyst at Investing.com, said: ‘Alphabet’s disappointing numbers suggest corporations worldwide are uncertain about the pace of interest rate cuts from central banks.’
‘Expectations were simply too high to match,’ said Steve Clayton, head of equity funds at Hargreaves Lansdown. ‘This was always going to be one of those occasions when hope, expectations and reality collide.’
Microsoft also posted its quarterly figures on Tuesday.
The company, which recently became the world’s most valuable – topping $3 trillion, posted record sales of £49billion in the three months to December on the back of booming demand for AI and cloud technology.
Sales of Azure cloud computing, closely watched by investors, rose 30 per cent year-on-year, better than Wall Street had predicted.
Quarterly profits jumped 33 per cent to £17.2 billion but its shares were also hit.
Russ Mould, investment director at AJ Bell, said: ‘A lofty valuation means even the slightest hint of disappointment will be seized on by investors.’
Facebook owner Meta, Amazon and Apple are set to post their own quarterly figures today.
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