Before the bell: records mask cracks in Big Tech

US markets closed at new record highs on Thursday despite setbacks among the major technology companies. Apple announced a massive share buyback programme.

US markets ended Thursday at fresh records despite disappointing results from the Magnificent 7. The S&P 500 gained 1% and the Russell 2000 rose 2.2%. The strength of the broader market helped mask weaker performances among the largest tech companies. Meta Platforms (-8.6%), Microsoft (-3.9%) and Nvidia (-4.6%) dragged on the index, with the first two reporting earnings. Plans to invest tens of billions more than expected weighed on sentiment. Nvidia declined as Alphabet and Amazon increasingly move to develop their own AI chips. Alphabet (+10%) was the clear winner of the earnings season. If the stock rises another 5%, it could become the most valuable company in the United States by market capitalisation. Apple (+0.4%) also reported earnings after the close. The tech giant warned that memory chip costs will rise sharply from this quarter onwards. Earnings increased by 22% to 2.01 dollar per share, while the company also announced a 100 billion dollar share buyback programme.

In Asia, the Japanese market is recovering slightly this morning, with the Topix up 0.2%. The weakening of the yen is fuelling speculation that the Bank of Japan may need to intervene in the currency market. Most European exchanges are closed today due to May 1. US markets, however, are open. Chevron, Colgate-Palmolive, ExxonMobil, Moderna and Estée Lauder will report earnings today.

100 billion dollar in share buybacks

Globally, no company buys back as many of its own shares as Apple. When it released its quarterly results yesterday evening, the group announced another 100 billion dollar buyback programme. Investors can forgive the slightly disappointing iPhone sales. Revenue from iPhones came in at 56.99 billion dollar, 200 million dollar below expectations. But there are new growth drivers. With the launch of the new Apple MacBook Neo, priced at 500 dollar for students, the company could unlock a 20 billion dollar market for low-cost laptops. This will likely result in lower margins in the future, combined with higher memory chip prices, Apple warned. And importantly, Apple no longer wants to adhere to its net cash policy, under which excess cash is returned to shareholders via buybacks. This may indicate that Apple intends to invest more or pursue acquisitions. Under the new CEO, who will take office later this year, significant changes are expected. And that is a positive development.

What are the most valuable social media platforms?

To answer that question, it helps to look at where you spend your time online. Personally, I spend a lot of time on X, as there is no larger ecosystem for finance accounts. I often find news there that only later becomes mainstream. LinkedIn, owned by Microsoft, is full of AI-related posts but is useful for connecting with capital-rich clients, making it valuable for sales profiles. Facebook and Instagram, both owned by Meta, are less interesting to me, although one feature stands out: groups where users can engage in discussions on specific topics. That clearly adds value. But if you believe in that concept and want more high-quality answers, one platform stands out: Reddit. The company has been publicly listed since 2024 and is growing rapidly. It has 126.8 million daily active users who ask questions and help each other within communities and interest groups. This is gradually translating into financial results, as shown in the quarterly figures released after the close on Thursday. Revenue rose 69% last quarter to 663 million dollar. With earnings of 1.01 dollar per share, the stock may appear expensive, but the growth is remarkable, reminiscent of Facebook’s early years. If you are looking for a strong growth story in the social media sector, Reddit is my top pick. I expect a positive market reaction.

Did you know…

that the London Stock Exchange is not closed on May 1? The United Kingdom follows a different holiday calendar than continental Europe. The exchange will be closed on May 4 for the so-called May Day Bank Holiday.

This article was translated from Dutch and was originally published on Spaarvarkens.be.