Tech Stocks Are Selling Off. Amazon's Earnings Just Made It Worse

Public.com presents The Rundown, your daily market update in 10 minutes. My name is Zaid Admani, and today is Friday, October 30th. In today's episode, we'll break down why Amazon and Intel are getting crushed this morning, even though their AI businesses are booming. We'll also do a rapid-fire earnings recap for Rivian, Reddit, Pinterest, Roblox, and SanDisk. Then stick around to the end of the show to find out why GM is moving from the New York Stock Exchange to the NASDAQ. We've got a great show for you today. Let's go. Stocks fell on Thursday. The S&P 500 was down 0.3%, but the NASDAQ fell by 1.4%, and you can pretty much blame that one on Google. Yesterday, Google stock fell by more than 12% following their earnings report, which was the worst day for the stock in its history. History. The sell-off wiped off roughly half a trillion dollars from Google's market cap. If you want to know why Google stocks sold off so hard, go check out yesterday's episode. I broke down some of the big issues from Google's earnings. Now, there was some good news yesterday. The rest of the market outside of tech actually had a pretty decent day. More than 400 stocks in the S&P 500 were in the green on Thursday. And the equal weight S&P was up about 1.2%. Not to mention the Russell 2000 small cap index was up more than 1% as well. You know, we did get some encouraging economic data yesterday. The third quarter U.S. GDP grew at a 3.4% annual pace, which beat estimates. And core PCE inflation, which is the Fed's preferred inflation gauge, came in right around expectation. at 3.1%. But right now, the main story is what is happening with the AI trade. Because if you're someone who mainly invests in index funds, AI and tech stocks likely have an outsized impact on your portfolio. And if you're someone like me, who's over indexed on tech stocks and ETFs, Yeah, it's not pretty right now. I am getting cooked. I mentioned earlier this week that I thought there was like a positive vibe shift happening with the AI trade from the surprisingly strong Anthropic S1, but it looks like that lasted like a day and a half. Google kind of ruined it by missing on earnings and posting $9 billion in negative free cash flow. And then Amazon added to the bad news by reporting earnings last night. We'll get into those numbers in just a bit. But yeah, it looks like we could be headed for a brutal end to the week. I'm recording this in the pre-market and the S&P and NASDAQ futures are deep in the red. I think at this point, I'm just gonna print out a heat map of my portfolio, tape it to my body when I take my kids out trick-or-treating on Saturday, because it's definitely the ugliest thing that I've seen in a while. So yeah, if you need a last minute Halloween costume, You got a lot of options this year in the stock market. Now, I really wonder where the market's going to go from here, because we're still in the thick of earnings season. We got some big-time earnings coming next week, like Apple and Palantir. So we'll continue to stay on top of that. We'll break down those earnings next week, along with everything else happening. So if you're new here, you picked a great time to start listening to the podcast. Definitely get subscribed if you haven't already, and tune in every day to stay in the loop. Let's run through some headlines. Slimes. Starting with Amazon, Amazon reported earnings last night and investors did not like what they heard. The stock is down more than 5% this morning in reaction to the report. Let's dig into the headline numbers first. Revenues grew by 12% and profits came in at $20.7 billion. Both of those numbers were a little below what Wall Street was expecting. Now, just like with Google and Microsoft earlier in the week, cloud computing. Was the bright spot revenues for Amazon Web Services were up 39% to $46 billion accelerating for the sixth straight quarter. CEO, Andy Jassy even predicted that AWS would grow over 40% a year in 2027 and 2028 and putting it on track to becoming a trillion dollar revenue business within a decade. Thanks to all the AI demand from their customers. So AWS clearly not the problem. But everything else was. The online store sales grew just 2% for the quarter, which is the slowest pace in over three years. And ad revenue was up just 11% to $19.6 billion, missing estimates by more than a billion dollars. Now, some of that slowdown was expected because Amazon moved their Prime Day this year from July to June, so it wouldn't happen during the World Cup. So those sales during Prime Day this year showed up earlier. Then they did last year, but then again, analysts already knew about that shift and the results still came in below expectations. Not to mention Amazon sales and operating profit forecast also came in below what Wall Street was expecting for the upcoming holiday quarter. But I think the biggest concern from the earnings report was the spending. Amazon is spending a lot of money to build out AI infrastructure. In the third quarter alone, Amazon spent $75 billion on capex which was way more than analysts had expected and the company expects total capex spend to be around 220 billion dollars for this year and Andy Jassy on the earnings call said that Amazon will spend meaningfully more in 2027 and all that capex spending is just crushing Amazon's free cash flow and q3 cash flow was negative 7.6 billion dollars and if you look at the last 12 months ending in September Free cash flow for the company was negative $42.4 billion. For context, a year earlier, it was positive $14.8 billion. So Amazon is just burning a ton of cash to build their data centers. Amazon's earnings are very similar to Google's. Their cloud business is crushing it. Their existing business came in weaker than expected. And they're spending ungodly amounts of money to build AI and planning to spend even more, which is pushing their cash flow Deep into the red, I think investors are finally starting to freak out about that and push back. The question, though, is will these companies actually pull back on capex spending because of investor anxiety? We haven't seen any signs of that so far, but the stock price keeps falling. They're going to have to address it at some point, whether it's going to be slowing down capex a little bit or showing the ROI from that capex. For now, though, there seems to be a lot of anxiety in the market from all this spending. Let's shift gears and talk about Intel. Intel reported earnings last night and the market reaction has been ugly. The stock is down more than 25% in pre-market trading. Now here's the thing. The third quarter numbers were pretty solid. Revenues were up 21% from a year ago to $16.5 billion. That was roughly in line with estimates and adjusted earnings more than More than doubled to 52 cents a share and easily beat. Expectations. One of the bright spots continues to be Intel's data center business. It is booming right now. Revenues from its data center and AI division jumped 78% from a year ago to $7.3 billion because of the massive demand for CPUs that are required to run AI agents. With more and more people using apps like Meta's Muse, the demand for these CPUs will keep going up. But again, the stock is still getting hammered today. And the reason for that is. Is the fourth quarter forecast. Intel says they expect sales to come in between 15 and $16 billion for the fourth quarter. That is well below the 17 plus billion that analysts wanted to see and less than what the company just reported in the third quarter. There seems to be two big problems right now impacting the company's outlook. The first is a supply bottleneck that is preventing Intel from meeting demand for their customers. The second thing impacting Intel's outlook is the shrinking demand. For PCs, Intel says they expect the PC market to shrink by about 12% this year and another 10% next year, which is a big deal for Intel because PCs still account for about half of Intel's revenues. And what's kind of funny is that the reason the demand for PCs are dropping is because of AI. AI data centers are buying up so much memory that memory prices have exploded. Everyone knows about that by now. But that's making computers for us normal people a lot more expensive. Anyone trying to buy RAM right now knows exactly what I'm talking about. And with RAM and computer prices so high, fewer people are buying them. Therefore, Intel is selling fewer chips to computer companies. So it's kind of funny, like for Intel, the AI boom is both helping them and hurting them. They're selling more CPUs to data centers, but less CPUs to computer makers. But look, despite the disappointing outlook and the slowdown in PC sales, Intel will continue to invest more and more in the business to build out their supply to produce more chips. Intel's CFO warned the company is likely to produce $0 in free cash flow in 2027. And that seems to be the trigger warning for the stock market right now. We saw this with Meta, we saw this with Google, and we just saw this with Amazon. The market does not like the lack of cash. But look, if you zoom out, Intel stock was already up about 150% this year. heading into this earnings report so they've had a great year and i do buy into the theory that CPU demand will continue to explode because of more agentic AI use so if you've been eyeing Intel for a while well then you might finally have a chance to get in at a better price let's talk about some stocks making moves today and we're going rapid fire again first up Rivian Rivian shares are up around 5% this morning after the EV company reported earnings and beat on both top line and bottom line. Revenue was up 38% to more than $2.1 billion, and the company delivered a record 19,248 vehicles last quarter. The big driver for that was the R2, which is Rivian's newer, smaller, cheaper SUV. It just became the best-selling model for the company. Now, Rivian is still losing money overall. But their gross profit did jump to $176 million, up from the $24 million a year ago, thanks in large part to their software business, which brought in $605 million at a 42% gross margin. This is the part of the business where Rivian licenses their software to other car companies like Volkswagen. Overall, the market liked what they heard, and Rivian's stock is up this morning. But if you zoom out, it has been a pretty ugly year. Rivian hit a new 52-week low on Thursday. And heading into today, the stock is down 41% on the year. Next up, let's talk Reddit. Reddit shares are down more than 20% this morning after the company reported earnings. The numbers were kind of a mixed bag. Revenues grew 53% last quarter, but daily users fell by 2%. And the company's revenue outlook was also disappointing. A big problem for Reddit seems to be Google. Reddit's CEO said that Google search traffic dropped by more than a million referrals a week in October. Because of Google's AI answers, the AI answers are now good enough that people don't have to click through Reddit to find the answer they're looking for. So this could be a big problem for Reddit. I mean, if it keeps up, total users could fall by low double digit percentages next quarter, according to the company. Now, I bet many websites are seeing the same thing right now because of the AI answers. Now, Reddit is planning to test requiring users to log in to access the website. I don't really know what problem that's going to solve. But the market is freaking out about Reddit. The stock has already lost about half its value heading into today, and it's only getting worse. Next up, we have Pinterest. Their shares are also down double digits this morning after the company missed on earnings on both revenue and profit. On top of that, their forecast for the holiday quarter also came in below what Wall Street was hoping for. I feel like with more and more people using AI agents to shop and come up with ideas, Pinterest could be cooked in the long term. Pinterest stock was already down more than 40% this year heading into today, and it's down another 15% this morning at the time of this recording. Next up, we have Roblox. Roblox shares are down around 15% this morning after the company said their daily active users fell by 9% from a year ago to 138 million. And the number of hours people spend on the platform dropped by 15%. You know, Roblox has introduced stricter child safety measures, including age verification. And those measures have had a big impact on user growth. The company expects bookings to fall another 10 to 15% next quarter. Also, the CFO of Roblox said that GTA 6 coming out on November 19th, which is one day after my birthday. Could be a modest headwind for the company. Maybe I'm just really naive, but does this CFO think that nine-year-olds are going to be playing GTA 6? Anyways, it's been a pretty tough year for Roblox. The stock has lost more than half its value coming into today. And finally, we have Sandisk, which has been the second best performing stock in the S&P this year. But today's shares are down more than 8% despite the memory and data storage company beating earnings. Revenues jumped nearly 5x from a year ago to $11 billion and profits hit $8.1 billion. Not to mention the company's guidance also came in ahead of expectations. So the quarter itself was fine, but I think Sandisk is getting caught up in the overall AI sell-off. Plus, their stock was already up more than 450% this year coming into today. Let's wrap the show with a fun fact. General Motors is leaving the New York Stock Exchange after 115 years and moving their listing to the NASDAQ. Starting on November 17th, GM will trade on the NASDAQ exchange. Now, if you own GM stock, you don't have to do anything at all. It's all handled by itself. GM will still have the same ticker symbol. Now, the reason that GM says they're doing this is they want to be seen more as a tech-driven company. And for the most part, tech companies list on the NASDAQ. You know, GM is tired of being seen as an old-school car company. They want investors to focus on their investments in self-driving tech. And software, trust me, GM, I don't think you want investors to focus on your software because it's really bad. That's why you got bullied back into bringing back CarPlay. The reality is the reason that GM is making the switch over to NASDAQ is to get the index fund money. Once GM makes the switch over to the NASDAQ, they'll soon get added to the NASDAQ 100 index, which means that every ETF and fund that tracks the NASDAQ 100 index, which is trillions of dollars, will have to automatically buy GM stock. And that's why many big companies recently like Walmart and Hilton have recently made the switch to the NASDAQ as well. And the NASDAQ 100 index is very popular. And for a company to be listed in that index, the stock has to trade on the NASDAQ exchange. And that could be one reason why NASDAQ continues to land the biggest IPOs as well. The NASDAQ has had 59 traditional IPOs this year, raising nearly $120 billion. The New York Stock Exchange on the other hand has had 32 IPOs. Raising around $20 billion. Now, to be fair, SpaceX's $86 billion IPO is a big reason for that gap. But Anthropic has also chosen the NASDAQ for their IPO. So that gap will only get bigger. At this point, the New York Stock Exchange's main selling point seems to be letting you ring the bell at their iconic trading floor. Which, to be fair, is really cool. But it's not cool enough to overcome the advantages of being listed on the NASDAQ exchange. Well, all right, guys, that's the rundown for today. That's the rundown for this week. And what a week it was. This might be one of the toughest weeks I've had all year. I started off by getting the flu. Then I got an ear infection. And then my portfolio got absolutely wrecked. The good news is I get to go trick-or-treating with my kids tomorrow. So that's nice. Also, just a heads up, we will have an interview posted on Sunday. So keep an eye on your podcast feed for that. As always, thank you guys so much for listening, watching, and commenting. Shout out to Mike and V for all the work behind the scenes And we'll see you guys back here for the interview.