(Oct 21) : Stocks rose in late hours as SpaceX reported solid earnings fueled by a big jump in its artificial-intelligence business.
An exchange-traded fund tracking the S&P 500 gained after the close of regular trading. Elon Musk’s satellite, rocket and AI conglomerate posted US$4.4 billion in net income for the quarter ended in September, topping the average projection of US$1.88 billion. Super Micro Computer Inc.’s preliminary results beat estimates. Netflix Inc. sank on a disappointing forecast.
In regular hours, more than 400 firms in the US equity benchmark rose. Brent oil settled near US$109. Despite inaccurate reports that a peace agreement between the US and Iran is close, talks aimed at reaching a deal continue, according to a diplomat involved in negotiations. Long-term Treasuries outperformed.
Investors around the world will be closely watching a spate of tech earnings for clues on whether the AI boom can justify the billions of dollars being poured into the industry. Following SpaceX’s results, attention will soon shift to Meta Platforms Inc.’s figures on Wednesday.
The key question is whether recent growth rates can be sustained as comparisons become more demanding and macroeconomic risks persist, according to Ulrike Hoffmann-Burchardi at UBS Chief Investment Office.
“We expect a strong third-quarter tech earnings season from a fundamental perspective, but elevated expectations may lead to company-specific volatility,” she said.
“AI remains a long-term driver of earnings and economic growth, but investors are becoming more selective about which companies get rewarded from here,” said Anthony Saglimbene at Ameriprise. “For investors, that argues for owning AI exposure selectively rather than broadly, keeping technology concentration in check, and diversifying across market caps, sectors, and regions.”
Marking a sharp reversal from the broad-based rush into AI in recent years, investors are indeed becoming more selective and demanding with their bets on the technology. Elice Inc., a South Korean AI computing supplier scarcely known outside its home market, tanked 32% in its debut in Seoul.
While CoreWeave Inc. shares bounced, they have been under intense volatility as its bonds recently hit distressed levels on concerns over heavy borrowing.
“There are no signs that demand for AI is slowing,” said Angelo Kourkafas at Edward Jones. “We’re seeing healthy skepticism and a maturation of the theme, moving away from an environment where everything AI-related goes up toward a greater focus on quality and the companies with the deepest pockets to finance the investment needed to meet demand.”
Kourkafas noted that we’re also seeing earnings growth broaden beyond the largest companies. Against this backdrop, managing exposures is more important than trying to time pullbacks, he said.
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