The Nasdaq climbed last week. But the technology could be in trouble

The Google office in New York on February 2, 2023.

Ed Jones | AFP | Getty Images

This report comes from today’s CNBC Daily Open, our new international markets newscast. CNBC Daily Open updates investors on everything they need to know, wherever they are. Like what you see? You can subscribe here.

The Nasdaq Composite outperformed other indexes last week. But all is not rosy in technology.

  • China wants to achieve “about 5%” growth in 2023. This is the word of Prime Minister Li Keqiang, who spoke yesterday at the Chinese National People’s Congress. A draft budget presented to congress revealed that the country would increase defense spending by 7.2 percent to 1.56 trillion yuan ($230 billion).
  • Stocks in the United States rose on Friday as all major indexes closed higher while Treasury yields fell. Asia-Pacific markets traded mixed on Monday. China’s Shanghai Composite fell 0.24% as investors digested the country’s modest growth target for this year.
  • Bard, Google’s artificial intelligence engine, “is not search,” Jack Krawczyk, Bard’s chief product officer, told Google employees. Bard’s magic, on the contrary, is more of a “creative companion”. Employees told CNBC they were confused by Google’s sudden pivot.
  • PRO This week, Federal Reserve Chairman Jerome Powell will address Senate committees on the economy, and the February jobs report will be released. Economists expect one of them to be a major market mover; the other, not so much.

Helped by dovish comments from Fed official Raphael Bostic and a pullback in Treasury yields, US equities managed to shrug off their pessimism and rallied to end the week in the green.

The Dow Jones Industrial Average rose 1.17%, giving it a weekly gain of 1.75% that snapped its four-week losing streak. The S&P 500 gained 1.61%, a weekly increase of 1.9% on the week. The tech-heavy Nasdaq Composite climbed 1.97%, ending the week up 2.58%. It has been two consecutive months since the Nasdaq has outperformed other indexes.

Not that all is rosy in the tech industry. Amazon has stopped building “HQ2”. Meanwhile, Meta is pumping more money into its losing Reality Labs segment. The company has cut the cost of its virtual reality headsets – up to $500 on its high-end Meta Quest Pro – in a bid, perhaps, to boost sales.

All is not well in the much-vaunted field of artificial intelligence chatbots either. Google abruptly pivoted from its search-first strategy to positioning Bard as a companion to “explore your curiosity,” Krawcyzk told employees, which left them puzzled.

Maybe it’s really hard to integrate unpredictable AI chatbots into something as factual as web search. Recall the fiasco surrounding Microsoft’s AI chatbot, Bing, which threatened users and declared its love for them. (To Bing’s credit, this is remarkably human behavior.)

Despite the Nasdaq’s strong showing so far this year, it remains to be seen whether the technology’s promises match reality — and translate into further gains for the index. Companies need to be careful not to procrastinate too long: in today’s high interest rate environment, investors don’t have as much patience as they did a few years ago.

Subscribe here to get this report delivered straight to your inbox each morning before markets open.

Leave a Comment