INTC, AMZN, GOOGL Stocks Rise Overnight After Brutal Week: Dan Niles Sees AI Risks Showing Up In Big Tech Earnings

• GOOGL was the worst performer among the major hyperscalers, losing 12.6% in the week, its worst weekly move since 2008.
• Microsoft is the only Big Tech company reporting in the week that committed to stay cash flow positive, according to Niles.
• Retail sentiment was ‘extremely bullish’ for AMZN, GOOGL and INTC, but ‘bearish’ for MAGS. 

Tech stocks inched higher late Sunday after a challenging week, with sharp declines in Intel (INTC), Alphabet (GOOGL), Amazon (AMZN) and SanDisk (SNDK) shares triggered by their earnings reports.

GOOGL and INTC rose 1.4% each in overnight trading, while AMZN was up 1.5%. SNDK gained 3.4% in line with other memory stocks. Meta Platforms (META) and Microsoft (MSFT) were trading marginally higher.

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Investor Dan Niles, who runs Niles Investment Management, said that Big Tech reports clearly reflected AI-related risks, saying that “earnings has been more trick than treat for technology investors.”

The tech-heavy Nasdaq Composite fell 1.5% in the week, while The Roundhill Magnificent Seven ETF (MAGS), which tracks the biggest tech stocks, lost 2.3%.

GOOGL was the worst performer among the major hyperscalers, losing 12.6% in the week – its worst weekly move since 2008 – followed by AMZN, down 3.1%, and MSFT, which shed 0.5%.

AI Concerns Weigh On Big Tech

“Last wk (week), earnings had elements of all the AI issues I feared in my preview,” Niles said in an X post.

He argued that Microsoft is the only one of the Mag7s reporting in the week that committed to stay cash flow positive, while Amazon’s cloud unit sales missed expectations from some of the more bullish analysts. 

“M365 is likely to become the default option for enterprises that want AI in a safe environment through use of Co-Pilot,” he said.

“Amazon despite missing buyside AWS expectations of ~42% y/y growth with 39% reported (official sellside consensus of 38%) expects 40% revenue growth for AWS in CY27 and CY28 despite being the largest public cloud vendor. Also their LTM FCF burn of $42.4B in Q3 vs $7.6B in June helped lead to a $80B supplier financing arrangement facility post-earnings,” Niles said.

Alphabet missing Search revenue “for the 2nd quarter in a row and first miss in both total revenues and EPS for the first time since late 2022 raises AI disintermediation fears.” 

However, Search queries were the highest in five years, and Niles believes “Google will be a winner in consumer AI through their distribution through Android phones.”

Niles said Intel’s report was unexpected and that Advanced Micro Devices’ (AMD) report on Tuesday will clear the air over whether the issues are Intel-specific or industry wide. INTC dropped 28.6% on Friday, following its third-quarter report.

SNDK fell 13.5% on Friday despite beating first-quarter earnings and revenue estimates and issuing stronger-than-expected guidance.

Niles Says Investors Need To Be More Selective

Niles sees opportunities in Big Tech despite the near-term concerns, offering a comparatively more optimistic take on Microsoft and Alphabet. However, he cautioned that volatility could persist.

“Being more discerning and trading around positions has been the correct tactic. I think (it) will continue to be the case,” he said.

Niles also pointed to November’s historically strong performance, noting that the S&P 500 has averaged a 2.6% gain in midterm election years.

On Stocktwits, the retail sentiment was ‘extremely bullish’ for AMZN, GOOGL and INTC, but ‘bearish’ for MAGS. 

For updates and corrections, email newsroom[at]stocktwits[dot]com.

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