Disappointing results from Google's parent company Alphabet and Samsung Electronics' decision to skip a shareholder return plan dealt consecutive blows to investor sentiment, halting this week's technology stock rally and reigniting doubts over whether massive artificial intelligence spending can deliver adequate returns.
Alphabet plunged 10% after hours as its sales fell short of market expectations, reinforcing concerns that Google is still losing ground to competitors despite pouring hundreds of billions of dollars into AI. Samsung Electronics' Seoul-listed shares dropped more than 6% at one point after the company failed to announce a new shareholder return plan, disappointing investors. The Kospi index — widely viewed as a key barometer for the global AI trade — fell 1.2%, a sharp reversal from Wednesday's largest single-day gain since July, which had been driven by SK Hynix's strong results. Nasdaq 100 futures slid 1.1%.
This earnings season is increasingly becoming a stress test for the AI investment theme. Investors are demanding concrete evidence that heavy capital expenditure is translating into more robust profit growth. Later this week, Amazon will report results, with Apple following next week, leaving market sentiment's stabilization still uncertain.
"The market is picking up cautious signals from Fed Chair Warsh, which may be related to perceived excessive optimism in the AI space," said Eugene Leow, a strategist at DBS Bank in Singapore. "Demand for safe assets and expectations of a potential slowdown in AI-related activity are putting downward pressure on yields."
The Kospi fell 1.2% to 5,940 points. Samsung Electronics dropped more than 4%. SK Hynix gained nearly 4%.
Nasdaq 100 futures slid 1.1%.
The yen was little changed at 157.83 per dollar.
The two-year U.S. Treasury yield fell 2 basis points to 4.68%, and the 10-year yield also declined 2 basis points to 5%.
Japan's 10-year yield was flat at 2.825%.
Gold edged lower, falling 0.7% to about $4,040 per ounce.
Brent crude fell 1.6% to $109 per barrel.
Samsung and Alphabet Weigh on Tech Sector
Samsung Electronics' chip division profit fell short of investors' high expectations, even as the company raised its capital expenditure plans in response to rising memory chip prices driven by sustained demand for AI infrastructure. However, the company said it would only announce specific shareholder return plans by the end of January next year, in stark contrast to SK Hynix, which announced an additional shareholder return plan of approximately $45 billion alongside its strong results.
"Delaying shareholder return details to January is disappointing," said Rob Li, managing partner at Amont Partners in New York. "This gives equity traders a reason to rotate funds into SK Hynix." SK Hynix shares rose 4% on the day.
As for Alphabet, the sales miss raised concerns that Google is being caught up in the AI race. Wataru Akiyama, a strategist at Nomura Securities, noted: "Market expectations were already extremely high, and to some extent, merely meeting expectations is not enough. Unless companies can demonstrate earnings growth that exceeds these lofty expectations, their share prices may fall when results are released."
Not all was negative this earnings season. Microsoft shares rose 2.9% after hours, buoyed by solid cloud computing growth. Oracle had previously surged 11% after releasing a long-term free cash flow outlook, with its credit risk indicators showing the largest improvement in nearly nine months.
U.S. Treasury Yields Retreat as Market Turns to Safe Havens
Technology stock weakness drove capital flows into U.S. Treasuries. After the Federal Reserve held rates steady on Wednesday, short-term Treasuries rose for a second consecutive day, with the rate-sensitive two-year yield falling 2 basis points to 4.68% and the 10-year yield also declining 2 basis points to 5%. Gold edged lower, falling 0.7% to about $4,040 per ounce. Bitcoin dropped 1.5% to around $80,000 — the synchronized pullback further underscored Treasuries' reassertion as the market's preferred safe-haven asset.
"The market is picking up cautious signals from Fed Chair Kevin Warsh, which may be related to perceived excessive optimism in the AI space," said Eugene Leow, a strategist at DBS Bank in Singapore. "Demand for safe assets and expectations of a potential slowdown in AI-related activity are putting downward pressure on yields."
Key Events Expected to Keep Driving Markets
On the macroeconomic front, markets face multiple tests this week. The Federal Reserve voted 10-2 to keep rates unchanged, with Chair Kevin Warsh saying at a press conference that monetary policy remains undecided for now. On Thursday, the Fed's preferred inflation gauge — core personal consumption expenditures (PCE) data — will be released, providing fresh clues on price trends.
The European Central Bank and the Bank of Japan will announce rate decisions on Thursday and Friday respectively, with both expected to hold rates steady. Peter Dragicevich, a currency strategist for Asia-Pacific at CorPay, wrote in a research note: "The ECB is not expected to adjust policy, but it may focus on emphasizing that it has the tools to address eurozone sovereign debt risks and guard against systemic economic threats, in order to calm market concerns."
Additionally, oil prices were dragged down by progress in Middle East diplomatic efforts, with global benchmark Brent crude falling 1.6% to $109 per barrel.
Comments