Monday’s stock market session, the first after warnings from artificial intelligence (AI) magnates about the need for a brake, highlighted the different trends in the technology industry, proclaiming the winners and losers of this unexpected movement sparked by the words of Dario Amodei, CEO of Anthropic, and largely supported by the top executives of OpenAI and SpaceX, Sam Altman and Elon Musk, respectively.
In this new technological scenario, software and cybersecurity companies seem to have regained investors’ favor. Palo Alto Networks, which surged 13%, Adobe, Salesforce, Shopify, ServiceNow, Figma, and Atlassian recorded strong gains. Many of these companies have already accumulated a recovery from their annual lows marked last spring, in response to what the industry dubbed the “SaaSpocalypse” or software apocalypse, due to the emergence of AI, especially led by Anthropic, which became the public enemy number one of this industry. In fact, for a moment, it seemed that AI was going to wipe out the software industry in one fell swoop.
Thus, Salesforce, for example, has risen 75% from its annual low price, recorded at the end of June, while Adobe, practically in the same period, has gained almost 40%. Palo Alto Networks, for its part, has doubled its value since mid-May. Companies like Salesforce bet against this scenario, with multibillion-dollar share buyback plans, which have now become favorable.
Microsoft, also heavily hit in the first part of the year, rose nearly 2% in the first trading day of the week and has already accumulated a 45% rebound from its annual low, recorded at the end of June.
Conversely, chip and hardware companies suffered a new setback, becoming the losers of this new scenario, which seems to show that part of their bubble may have burst. The Philadelphia Semiconductor Index has dropped 24% from its all-time high, reached on June 22. Similarly, from their annual highs, companies like AMD, Micron, Intel, or Samsung have lost between 20% and 30% of their value.
Although it is only the reaction of investors for one day, the market believes that chip companies and other digital infrastructure equipment providers could be seriously harmed if the pace of AI development really slows down, as Anthropic demands.
Some investors perceive greater fragility in this industry, after an almost uncontrollable euphoria at the start of the year fueled by investments in AI infrastructure, which this year could exceed 800 billion dollars. With Anthropic’s warnings, this investment cycle, which has come hand in hand with companies like Meta, Alphabet, Amazon, or the aforementioned Microsoft, may have reached its peak, at least for now. The truth is that these four companies recorded strong advances at the start of the week, amid the technological storm generated by AI.
If this scenario occurs, the free cash flow generation of these tech giants, a metric closely analyzed by investors, would take a breather and could return to the growth path after the impact caused by the investment effort.
Additionally, comments about the controversial circular financing around Nvidia’s growing role as a chip supplier and financier of its own AI clients, with a strong investment bet, have spread again in the market. Some investors have even compared this supplier financing scheme to the one that preceded the dot-com bubble burst in 2000.
Looking ahead, investors are already watching the IPOs of Anthropic and OpenAI, which aim to be two of the largest IPOs in history. These operations will depend on the accounts and growth forecasts of these companies’ businesses but could be overshadowed if there is a greater stock market correction of tech stocks.
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