Earnings reactions over the past two days have been bad for technology stocks, following the earlier drop in Alphabet (GOOGL), which served as a warning sign for Amazon (AMZN) investors.
Intel (INTC)
Intel (INTC) shares fell over 20% in the session, dropping nearly 30% at one point. The company beat on most of the quarter but gave weak guidance, which drove the selloff. Revenue came in line with street expectations and adjusted earnings per share beat, reported at 52 cents versus the 40 cents expected. The worry is the PC business. Intel (INTC) expects a drawdown over the next few quarters because rising memory prices keep pushing higher, which may also cause demand destruction in that space. The company is also having trouble in its AI business due to supply chain disruptions, so it has not been able to gain as much as it wants in AI or in building out its fabrication plants. A problem at its fab plant in Israel hurt both the top line and the bottom line. The core issue remains the light guidance.
Amazon (AMZN)
Amazon (AMZN) guidance also came in below street expectations, and the company missed on both the top and bottom line for the current quarter. AWS still grew about 39% to 40% year over year, a decent rate, but the retail or online store business is slowing. Amazon (AMZN) keeps spending on capex, which is creating negative free cash flow. As that free cash flow goes more negative, the street has not been kind to such companies. The stock was down only about 2.4% in the session, bouncing back from a drop of roughly 6.5% to nearly 7% the prior night. The big question going forward is how much these companies must spend on cloud at the cost of their main cash engines.
SanDisk (SNDK) also reported and posted good earnings.
Energy majors: Exxon (XOM) and Chevron (CVX)
Energy and oil majors were the winners on the day, running at full capacity to take advantage of high diesel prices. Exxon Mobil (XOM) rose about 2.5% and Chevron (CVX) rose over 1%. Both beat on the top and bottom line, with much of the beat coming from the midstream, or refining, business.
Exxon Mobil (XOM) total production for the quarter was around 4.4 to 4.5 million barrels a day equivalent, pushing a lot of product through to refine and send downstream. Its upstream business, meaning extraction and getting oil to refiners, saw disruptions this year that cut earnings by about $2.9 billion, per the company. Refining stayed very profitable. Exxon (XOM) is still expanding in the Permian Basin and in Guyana. Guyana holds the second most reserves in the world by current studies, is friendlier to the United States, and is cheaper to extract from, so Exxon (XOM) looks set to double down there over the next few quarters while attention sits on Venezuela.
Chevron (CVX) also beat on top and bottom line. Total production was 3.98 million barrels a day equivalent. It is doubling down in Venezuela and believes it is on track for about 300,000 barrels a day in gross production by year end. Chevron (CVX) also discussed future exploration using AI to find patterns in the Gulf of America to extract more oil.
Crack spreads are topping off and starting to move lower, which will squeeze refining margins over the next quarter.
Binance crypto hack
Binance, the largest cryptocurrency exchange, suffered what is described as the world's largest crypto hack. Up to $6.3 billion was targeted. About $3 billion of those assets appear to have been locked or frozen, leaving a question mark over the remaining $3.3 billion. Initial reports point to a North Korean hacking group, which found an exploit on the laptop of a Binance engineer.
Several asset issuers froze funds in transit during the hack. Tether locked about $1.57 billion, Circle more than $800 million, and Ripple about $200 million. World Liberty Financial, tied to the Trump family, is also involved and locked about $27 million in stablecoins, though it still has some exposure. Binance has a hold on both deposits and withdrawals and is working with the FBI and the Secret Service to recover the assets and bring those responsible to justice.
The hacked amount is about 3.8% of Binance's total portfolio assets. The dollar figure is large, but the company is confident it can make customers whole through revenue and current reserves. This echoes the FTX collapse, which also happened in October 2022.
Some view the event as raising concerns about the so-called confiscation resilience that the crypto industry often promotes. Bitcoin had a bad day at about 76,000. One market view was surprise that Bitcoin was not down more, given how quickly the companies acted to contain the breach.
