Software stocks faced a sharp sell-off as investors grew concerned that rapid AI advancements might erode margins and pricing power for traditional vendors. IBM and ServiceNow reported earnings that beat Wall Street estimates, yet their shares plummeted after hours. IBM stock fell nearly 9%, while ServiceNow shares dropped almost 18%, even though both companies exceeded revenue and per-share earnings expectations. The broader software sector suffered alongside, with major technology funds declining by more than 2%.
Investors are worried that AI tools from companies like Anthropic and OpenAI could displace existing cloud subscription models. Salesforce, Workday, and Oracle also dropped, with Microsoft hitting the hardest, down 14% this year. ServiceNow cited the U.S.-Iran war as a factor weighing on results, marking its worst day on record. Despite the volatility, analysts suggest focusing on long-term growth potential and diversifying portfolios to handle market swings.
In contrast, Nvidia and Broadcom remain top AI investment choices, generating massive profits from the sector. Nvidia's revenue surged 73% to $68.1 billion, with its graphics processing units in short supply due to huge demand. Broadcom's AI semiconductor division grew 106% year-over-year to $8.4 billion in fiscal 2026 Q1. Both companies are positioned to benefit from long-term AI trends as data center build-outs continue for many years.
Tesla reported positive free cash flow of $1.44 billion in the first quarter, beating estimates of 77 cents per share. However, shareholders later expressed worry about Musk's $25 billion AI plan for humanoid robots, which could drag free cash flow into negative territory. Meanwhile, Best Buy appointed Jason Bonfig as new CEO to navigate an AI boom while facing competition from Amazon and Costco.
Key Takeaways
['IBM and ServiceNow stocks crashed 9% and 18% respectively despite beating earnings estimates due to AI fears.', 'Nvidia revenue grew 73% to $68.1 billion, cementing its status as a premier AI investment.', "Broadcom's AI semiconductor division expanded 106% year-over-year to $8.4 billion in fiscal 2026 Q1.", 'Software stocks including Salesforce, Workday, and Oracle fell as investors fear AI will replace cloud subscriptions.', 'Microsoft dropped 14% this year, suffering the most among major software companies.', 'Tesla reported positive free cash flow of $1.44 billion but faces scrutiny over a $25 billion AI spending plan.', 'ServiceNow shares hit an all-time low, sinking 18% on Thursday amid geopolitical tensions.', 'AI trading systems are evolving into autonomous agents with distinct behaviors and risk appetites.', 'Chinese AI stocks are attracting Australian fund managers for their earlier development stage and value.', 'Marvell secured a deal with Google but faces valuation concerns with a P/E ratio of 51.2 times.']IBM and ServiceNow stocks drop despite strong earnings
IBM and ServiceNow reported earnings that beat Wall Street estimates, but their stocks fell sharply after hours. IBM shares dropped 5.3% while ServiceNow shares fell 4.8% even though revenue and per-share earnings exceeded expectations. Investors are worried that rapid advances in artificial intelligence might make it hard for these companies to keep up with innovation. The broader software sector also suffered as major technology funds declined by more than 2%. Experts suggest investors should focus on long-term growth potential and diversify their portfolios to handle market volatility.
IBM and ServiceNow stocks crash amid AI fears
Shares of IBM and ServiceNow crashed significantly after both companies reported earnings last night. IBM stock fell nearly 9% and ServiceNow stock dropped nearly 18% even though both firms beat earnings expectations. Investors are concerned that artificial intelligence could erode margins and reduce pricing power for software companies. Despite the sell-off, IBM beat adjusted earnings per share estimates by $0.10 and ServiceNow boosted its fiscal 2026 guidance for subscription revenues. Analysts note that macro issues impacted results but did not change the long-term thesis for these companies.
IBM stock plunges as quarterly results miss targets
IBM stock plunged more than 8% in extended trading after the company reported fourth-quarter earnings that missed analyst expectations. The tech giant reported earnings of $3.60 per share, missing the consensus estimate of $3.64, and revenue of $16.7 billion, which was below the estimated $16.8 billion. While cloud and AI revenue grew 14% year-over-year to $7.7 billion, the Global Business Services division saw a 10% drop. IBM expects full-year 2024 earnings to range between $10.80 and $11.00 per share, below the consensus estimate. The company remains optimistic about its long-term prospects despite the recent stock decline.
Nvidia and Broadcom remain top AI investment choices
Nvidia and Broadcom are considered premier AI investments because they are generating massive profits from artificial intelligence. Nvidia's graphics processing units are in short supply due to huge demand, and its revenue grew 73% to $68.1 billion in the latest quarter. Broadcom partners with end users to design custom application-specific integrated circuits that suit specific workloads. Its AI semiconductor division saw 106% year-over-year growth to $8.4 billion in fiscal 2026 Q1. Both companies are positioned to benefit from long-term AI trends as data center build-outs continue for many years.
Nvidia and Broadcom lead AI investment opportunities
Nvidia and Broadcom are growing at a rare pace and are seen as premier AI investments due to their strong profits. Nvidia's revenue grew 73% to $68.1 billion in its latest quarter, with analysts expecting 79% growth next quarter. Broadcom designs custom chips for specific workloads, and its AI semiconductor division grew 106% year-over-year to $8.4 billion in fiscal 2026 Q1. Broadcom CEO Hock Tan expects the custom AI chip business to generate $100 billion or more in revenue by 2027. Both companies are expected to benefit from recurring revenue as high-end computing units eventually burn out after years of use.
Tesla reports positive free cash flow in first quarter
Tesla reported a surprise positive free cash flow of $1.44 billion in the first quarter, defying expectations for cash burn. The company also reported earnings of 85 cents a share, beating estimates of 77 cents, on revenue of $24.3 billion which was in line with expectations. Shares of the automaker rose 3.4% in extended trading after the announcement. Tesla has been investing heavily in artificial intelligence and autonomous driving to maintain its competitive edge. The company has faced challenges including supply chain disruptions and regulatory scrutiny but continues to grow.
New CEO must grow Best Buy amid AI boom
Jason Bonfig will become the new CEO of Best Buy in November to help the company find its footing after the pandemic. Best Buy has lost pandemic-era momentum with annual revenue falling 18% in the last five years and its stock down more than 40%. The retailer faces competition from Amazon, Costco, and Home Depot in big-ticket categories. Bonfig, 49, has not publicly detailed his strategy but has spent 27 years with the retailer. During the previous CEO's tenure, the store count declined by about 100 locations and the workforce shrank by roughly 43,000 employees. Best Buy announced plans to open six new stores, marking its first net increase in more than a decade.
Chinese AI stocks look attractive for investors
Australian fund managers believe Chinese AI stocks offer better value than US rivals because they are at an earlier stage of development. Local fund managers are eyeing Chinese artificial intelligence players amid renewed optimism in the sector. The Philadelphia Stock Exchange Semiconductor Index rose nearly 2 per cent on Wednesday, marking its 17th straight positive session. With month-to-date gains of 40 per cent, the index is heading for its biggest rise since 2000. This rally continues despite ongoing tensions stemming from the Iran war.
Investors worry about Tesla's $25 billion AI plan
Tesla shareholders initially felt relief when the company reported earnings, but executives later revealed Musk has expensive ambitions for artificial intelligence and humanoid robots. Tesla expects to spend $25 billion on capital expenditures this year to finance its work on AI and robotics. This massive spending is expected to drag Tesla's free cash flow into negative territory. The company's C.F.O. told analysts on Wednesday that these moonshots require years and billions to finance. Investors are reminded that investing in a Musk-owned company means contending with large, long-term projects.
Software stocks fall as AI fears grow
Software stocks plummeted Thursday after disappointing results from ServiceNow and IBM. Salesforce, Workday, and Oracle also dropped as investors fear artificial intelligence will displace cloud subscription models. ServiceNow cited the U.S.-Iran war as a factor weighing on results, and its shares sank about 18% Thursday, its worst day on record. The sector has been beaten down on concerns that AI tools from companies like Anthropic and OpenAI will replace existing software vendors. Microsoft, which has the most software exposure, has been hit the worst, down 14% this year.
Marvell gains Google deal but faces valuation questions
Marvell's AI story got stronger after winning business from Google, whose parent company is Alphabet. The deal strengthens Marvell's credibility as a custom silicon partner for big AI spenders. Marvell is differentiating itself through innovations in optical networking and memory efficiencies. However, the stock is getting pricier with a price-to-earnings ratio of 51.2 times. Analyst Rick Schafer of Oppenheimer still has Marvell as a top pick with a price target of $170.00 per share. Despite analyst enthusiasm, some experts suggest waiting for a pullback before considering a position due to the high valuation.
AI trading systems gain autonomy and personality
Artificial intelligence is increasingly acting on its own in trading, moving from data processing to autonomous decision-making. Major exchanges are rolling out agent-based systems that can execute multi-step strategies without continuous human prompts. This shift is driven by machines outperforming humans in consistency and processing capacity. Modern AI traders now exhibit distinct behaviors and preferences similar to human traders with different temperaments. The industry is moving toward persona-based AI trading where agents are configurable to handle different market conditions and risk appetites.
Sources
- Solid Earnings From IBM and ServiceNow Fail to Quell Artificial Intelligence Concerns, Sending Software Stocks Lower. Here's What Investors Need to Know
- Solid Earnings From IBM and ServiceNow Fail to Quell Artificial Intelligence Concerns, Sending Software Stocks Lower. Here's What Investors Need to Know
- IBM stock tanks as quarterly results fail to quell AI concerns
- Here's Why Nvidia and Broadcom Are Still Leading the Pack for AI Investing
- Here's Why Nvidia and Broadcom Are Still Leading the Pack for AI Investing
- Tesla reports surprise positive free cash flow in the first quarter
- New CEO must quickly stoke Best Buy to growth amid AI boom
- The AI trade is back on – but are Chinese firms Alibaba and Tencent worth buying up?
- Investors Fret Over Tesla’s $25 Billion A.I. Bet
- Software stocks plunge on ServiceNow, IBM results as AI fears escalate
- Marvell’s AI Story Just Got Stronger With Google — But Is it Too Late to Buy?
- The Personality Problem at the Heart of A.I. Trading
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