Recession Fears Grip Tech, While Eli Lilly and Berkshire Shine
August saw a decrease in the market valuations of big tech companies due to worries about the increased dangers of a recession and the rising expenses of artificial intelligence infrastructure, which would make the equities more vulnerable during a market correction.
Alphabet (NASDAQ:GOOGL) Inc. dropped 4.7% of its market value last month as worries about its profitability were stoked by a slowdown in YouTube’s ad revenue. The drop in Google’s stock price was also influenced by a U.S. judge’s decision that the company had broken antitrust laws and by OpenAI, a new rival that is creating a prototype AI-powered search engine.
The market value of Amazon.com Inc. (NASDAQ:AMZN) decreased by 4.5% as a result of a decline in online sales.
Last month, Tesla’s (NASDAQ:TSLA) market capitalization dropped 7.7% as a result of lower Q2 earnings and the announcement that Canada would impose a new 100% tariff on electric cars built in China.
The most valuable carmaker in the world began importing electric vehicles (EVs) from Shanghai to Canada last year, and Ottawa’s intentions to export from its more expensive U.S. production base aroused questions about the possible impact on profits.
In the meantime, Nvidia’s (NASDAQ:NVDA) market capitalization dropped 7.7% to $2.92 trillion in the final week of August after the company revealed revenues that merely exceeded expectations and predicted third-quarter gross margins below market predictions, disappointing investors who had been hoping for a better showing.
With over 80% of the market for AI chips, Nvidia is in a unique position to both benefit from and be the biggest enabler of the rapid advancement of AI technology.
Positively, the market value of American pharmaceutical company Eli Lilly (NYSE:LLY) increased by about 20%, outpacing market gainers, thanks to strong sales and the introduction of a weight-loss medication that dramatically lowers the risk of type 2 diabetes in adults who are overweight.
End of August saw Berkshire Hathaway’s (NYSE:BRKa) market value close above $1 trillion for the first time, a sign of investor confidence in the company that Warren Buffett spent nearly six decades building into what many view as a stand-in for the US economy.
The market capitalization of Meta (NASDAQ:META) also increased by almost 10% after the company exceeded analyst forecasts for its second-quarter sales and predicted rapid revenue growth in the July–September quarter. This suggests that high levels of digital ad spending on Meta’s platforms may be able to offset the expenses of its AI initiatives.
