Before the bell: hardware is moving faster than software

Meta and Microsoft are cutting staff and doubling down on AI. SAP offers a bright spot for the software sector.

Two factors pushed markets into the red yesterday. On the one hand, investors are increasingly concerned about the lack of a solution regarding Iran and the Strait of Hormuz—oil prices continue to rise. On the other hand, the AI revolution is not only creating winners in the chip sector but also a growing number of losers. And declines tend to come faster than gains: the software sector collectively plunged deep into the red after ServiceNow (-17.7%) reported a slowdown in orders. Despite decent results, IBM fell 8.2%, while Adobe dropped 6.6%. Although Microsoft had already reduced its workforce earlier, it is now offering a voluntary departure program to 7% of its US employees. The stock lost 4%. In contrast, the chip sector continues to deliver mostly positive news. Even Intel (+2.3%) reported better-than-expected results, and investors reacted enthusiastically to strong earnings from Texas Instruments (+19.5%), driven in part by robust demand for industrial chips. This likely also supports the continued rise of X-Fab (+2.6%) and Melexis (+4.2%), which have been climbing for several days.

Asian markets are trading slightly higher. Alibaba is up 1%. This morning, Belysse and the major Belgian REITs WDP and Xior are publishing quarterly results. On Wall Street, Procter & Gamble reports earnings before the open.

Mark Zuckerberg doubles down on AI at Meta

Employees at Meta Platforms were informed yesterday that 8,000 workers—around 10% of the workforce—will be let go. In addition, 6,000 open positions will no longer be filled. This underscores how decisively CEO Mark Zuckerberg is steering the company in a new direction. He had previously announced plans to invest 175 billion dollar this year in artificial intelligence across Facebook and its other platforms. The Wall Street Journal also reported that Meta stated in an internal memo earlier this week that AI agents should perform most of the work within the company: “The remaining staff must manage, evaluate and improve them.” Meta fell 2.3% during regular trading and was highly volatile in after-hours trading. Is this too drastic—a sign of panic—or ultimately a positive development?

Good news from the software front

The share price of SAP had declined along with the broader software sector over the past year and dropped another 6% yesterday. However, after the close on Wall Street, SAP reported better-than-expected first-quarter results, sending the stock 6% higher in after-hours trading. Although CEO Christian Klein said earlier this week that AI may hurt software companies in the short term before delivering benefits in the long run, revenue, profit and orders all exceeded expectations. Cloud revenues rose 19%, and the value of contracted business increased by 20% to 21.9 billion euro. Klein stated that performance is being supported by AI-driven business applications that SAP is rapidly integrating into its offering. SAP’s enterprise software is deeply embedded in its customers’ operations, which is why some investors believe the company is less vulnerable to disruption than other software players.

Did you know…

that after a robot recently outpaced human runners in a marathon, a robot developed by Sony—called Ace—has now defeated a professional player in a table tennis match?

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