Published on 24 Apr 2024 on Zacks via Yahoo Finance
What's in Store for These 5 Technology Stocks in Q1 Earnings?
Technology stocks are on the brink of revealing robust first-quarter results, which are expected to be up 19.4% from the same period last year on 8.3% higher revenues, per the latest Earnings Preview.The explosion of artificial intelligence (AI) in both production processes and final products has created tremendous opportunities for the overall technology space. The surge in demand for generative AI chips, essential for large language models, continued to bolster semiconductor companies' performance.Sales data from the Semiconductor Industry Association reflects this trend, with semiconductor sales showing strong year-over-year growth of 16.3% and 15.2%, respectively, in February and January.Several key factors have contributed to the positive outlook for technology stocks. The widespread adoption of Machine Learning, Augmented Reality/Virtual Reality devices, quantum computing and cloud computing has bolstered the performances of tech companies. Moreover, the escalating need for data centers, propelled by the surge in cloud capacity to accommodate AI-related workloads, has provided a significant tailwind for the sector.Technical advancements in Internet infrastructure and the rapid deployment of 5G technology on a global scale have further fueled optimism among investors. Additionally, the proliferation of IoT-supported industrial automation, coupled with increasing demand for smart electric appliances, wearables, electric vehicles and drones, has acted as a catalyst for the growth of technology companies.Despite these promising trends, the technology sector faces challenges on the geopolitical front. Escalating tensions between the United States and China, coupled with restrictions on China technology exports, have weighed on chipmakers. The sector's growth trajectory has also been hindered by ongoing conflicts in the Middle East and between Russia and Ukraine. Macroeconomic challenges such as high inflation and unfavorable currency fluctuations have also posed concerns.Despite these obstacles, an uptick in PC shipments and signs of recovery in memory spending, particularly in NAND and DRAM, have contributed positively to the sector's momentum. After two years of decline, the worldwide traditional PC market returned to growth during the first quarter of 2024, with 59.8 million shipments, up 1.5% year over year, according to preliminary results from the International Data Corporation Worldwide Quarterly Personal Computing Device Tracker.Overall, total S&P 500 earnings are now expected to be up 3.6% from the same period last year on 3.9% higher revenues. This follows the 6.8% earnings growth on 3.9% higher revenues in the fourth quarter of 2023. The “Magnificent 7” Tech players (Apple, Meta Platforms, Alphabet, Microsoft [MSFT], Tesla, NVIDIA, and Amazon) are expected to bring in 32.9% more earnings relative to the same period last year on 12.8% higher revenues.
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