FX.co ★ The Price of Progress: How AI Spending and Recession Are Squeezing Tech Giants

August Slump: Tech Giants Lose Billions

Big tech companies saw their market value fall in August as rising AI infrastructure costs and recession concerns grew. These factors made the companies' shares particularly vulnerable amid the market correction.

Alphabet Inc.: Ad Revenue Takes a Hit and AI Competition

Alphabet Inc. (GOOGL.O) lost 4.7% of its market cap in August. One of the reasons for this decline was a slowdown in YouTube advertising revenue growth, which increased investor concerns about the stability of the company's earnings.

The company's shares were also negatively affected by a US court ruling that Google violated antitrust laws. An additional blow was the emergence of a new strong competitor - OpenAI, a company working on creating a search engine based on artificial intelligence.

Amazon.com Inc.: A lull in online sales

Amazon.com Inc.'s (AMZN.O) market value fell by 4.5% in August. The main reason was a slowdown in online sales growth, which caused concern among investors and put pressure on the company's shares.

Tesla: Tariffs and weak financials

Tesla (TSLA.O), the world's largest automaker by market value, lost 7.7% of its market capitalization over the past month. This was influenced by lower-than-expected second-quarter earnings, as well as news of Canada's plans to impose a 100% tariff on electric vehicles made in China.

Tesla began exporting cars made at its Shanghai plant to Canada last year, and the new tariffs could hurt export profits. Of particular concern is that the more expensive U.S. manufacturing base could prove less competitive.

Risks are mounting

The decline in the market value of giants such as Alphabet, Amazon and Tesla highlights the growing economic risks associated with the development of new technologies and the possibility of a recession. Investors are looking to the future with trepidation, fearing further escalation.

Nvidia: Investor expectations were not met

In the last days of August, the market value of Nvidia (NVDA.O) fell by 7.7%, falling to $2.92 trillion. The drop came after the company provided a third-quarter gross profit forecast that was below market expectations. In addition, the announced revenues were only in line with forecasts, which disappointed investors who had hoped for more impressive results.

As the largest player in the AI chip market, controlling more than 80% of this segment, Nvidia is in a unique position. However, even this dominant role could not protect the company from market volatility.

Eli Lilly: Growth Leader Amidst Successes in Medicine

Amid a downturn in the tech sector, American pharmaceutical company Eli Lilly (LLY.N) demonstrated impressive growth. Its market value increased by almost 20%, which made it the leader in growth in the market. The main factors for its success were strong sales and the launch of a new weight loss drug. This drug not only helps in the fight against obesity, but also significantly reduces the risk of type 2 diabetes in adults, which caused a positive reaction among investors.

Berkshire Hathaway: Buffett is back on top

In late August, the market value of conglomerate Berkshire Hathaway (BRKa.N) surpassed $1 trillion for the first time. This historic moment reflects investors' confidence in the long-term strategy that Warren Buffett has been developing for nearly six decades. Berkshire Hathaway, as a barometer of the American economy, remains a reliable reference point for many market participants.

Trust in digital advertising offsets AI costs

The market value of Meta (an organization recognized as extremist and banned in Russia) also showed significant growth, increasing by almost 10%. This happened after the company beat market expectations for its second-quarter revenue and provided an optimistic forecast for the third quarter, covering the period from July to September. Meta's success shows that despite significant investments in the development of artificial intelligence technologies, high revenues from digital advertising on the company's platforms are able to offset these costs and support growth.

Volatility and New Leaders

August was a month of contrasts across market sectors. While tech giants struggled and stocks fell, pharmaceutical companies and stable conglomerates like Berkshire Hathaway posted strong gains. These developments highlight the importance of diversification and point to a shift in investor priorities.

Bonds Gain Strength: Investors Await New Data

Bond yields rose sharply on Tuesday, while Asian currencies and stock markets stabilized. Investors are eagerly awaiting fresh data to gauge how deeply the U.S. may cut interest rates in the near future.

Yields Rise: Bond Market Trends

The U.S. 10-year Treasury yield edged up slightly to 3.919%, while the two-year yield rose one basis point to 3.935%. The moves came as Asian markets resumed trading after a holiday in the U.S.

The swings reflect market sentiment as participants gradually scale back expectations for sharp easing from the Federal Reserve. Upbeat spending data on Friday has pushed the odds of a half-point Fed rate cut back.

Key data ahead: Focus on employment

Investors will be focusing on several key economic reports this week. One of them is the U.S. ISM manufacturing PMI, due out later in the day. But the most important is Friday's employment data, which could play a key role in the Federal Reserve's decision on the future course of interest rates.

Asian markets: Mixed moves

MSCI's broad index of Asia-Pacific shares outside Japan (.MIAPJ0000PUS) was down a modest 0.1%. Meanwhile, Japan's Nikkei (.N225) was up 0.7%, showing positive momentum. S&P 500 futures were flat, also pointing to uncertainty among investors.

The dollar steadied, as did U.S. Treasury yields, as market attention focused on Friday's data release.

Watching Friday: Markets' Crucial Moment

Raisa Rasid, global markets strategist at J.P. Morgan Asset Management in Singapore, said Friday's data will be crucial. Policymakers are hoping for signs of a cooling in the labor market, which could pave the way for interest rate cuts.

"It all comes down to Friday's numbers," Rasid said. She added that in the current environment, the market is not seeing signs of stress that would require an immediate 50 basis point rate cut. The key question now is how long risk assets can continue to rally amid this uncertainty.

Market Waiting

As investors brace for big economic events, markets remain tense. The question of how long the risk rally will continue and what the Fed's next move will be remains open. The coming days could be pivotal in shaping trends.

Forecasts and expectations: the economy at a crossroads

Economists expect the US manufacturing PMI to show improvement in August, but remains below the key level at 47.5. Despite this improvement, the indicator still signals a slowdown in the economy.

Impact on the dollar: what the experts say

Pepperstone analyst Chris Weston noted that weak data could weigh on the dollar. "If the data gets close to 50, it could cause those who have been betting against the dollar to reconsider their position," Weston added, highlighting the importance of the upcoming data for currency markets.

Labour market: focus on Friday

Analysts expect 160,000 new jobs to be announced on Friday and the unemployment rate to fall to 4.2%. The data will be an important indicator for assessing the health of the economy and could significantly influence future Federal Reserve decisions.

FX Markets: Stability and Uncertainty

During the Asian session, the dollar held its ground at 146.85 yen and traded at $1.1063 per euro. Meanwhile, rallies in the Australian and New Zealand dollars stalled, with the Australian dollar hovering just below $0.68.

Stock Market Trouble in Hong Kong and Australia

Hong Kong-based New World Development (0017.HK) fell to its lowest in two decades after the company reported a massive loss of $2.6 billion for the year ended June.

In Australia, supermarket giant Woolworths (WOW.AX) fell 3% on the day after the company announced it would sell its remaining stake in liquor chain Endeavour Group (EDV.AX).

Gold and Oil: Current Trends

Gold prices have stabilised at $2,494 an ounce after the metal hit a record high above $2,500 in August. In the oil market, prices remain under pressure as concerns about weaker demand outweigh the impact of geopolitical tensions in the Middle East. As a result, Brent crude futures fell 0.5% to $77.13 per barrel.

Volatility Remains

Global markets continue to show mixed results, reflecting economic volatility and uncertainty. Investors are focused on upcoming economic data and its impact on future interest rates and exchange rates.