Tech Stocks Struggle While Microsoft and Intel Shift Strategy

Monday, 16 September, was a mixed bag as market actors faced uncertainty regarding the upcoming Fed decision on Wednesday. On the other hand, Intel and Microsoft revealed significant strategic shifts that could bode well for their bottom lines. Let’s take a closer look at 16 September’s market news:

Monday’s Mixed Results

On Monday, 16 September, stocks saw mixed performance as tech shares struggled ahead of a pivotal week for the Federal Reserve. Investors may be anticipating the Fed’s first interest rate cut in four years, creating a tense market environment.

The tech-heavy Nasdaq (US-TECH 100) declined by almost 0.5%. Meanwhile, the S&P 500 inched up by a little over 0.1%, and the Dow Jones Industrial Average (USA 30) gained more than 0.5%. However, the tech sector as a whole faced pressure, a difficulty represented especially by Apple (AAPL), shares of which dropped by almost 2.7%. This decline may have been driven by concerns over weaker-than-expected demand for the new iPhone 16, as analysts reported slower early sales compared to 2023.

Broader market trends might reflect divergent expectations about the Fed’s upcoming monetary policy decision. Many investors are increasingly predicting a more aggressive 0.5% cut during the Federal Reserve’s meeting, which concludes on Wednesday, 18 September. This would mark a major shift in policy, ending the central bank’s long-standing tightening cycle aimed at controlling inflation.

Microsoft’s Buyback

Yesterday’s market news also included the announcement by Microsoft (MSFT) that its board has approved a new $60 billion share buyback program. The tech giant also declared a quarterly dividend of $0.83 per share, reflecting a 10% increase from the previous quarter.

In July, Microsoft revealed plans to increase spending on AI infrastructure, which contributed to an over 77% rise in capital expenditures for the quarter ending 30 June. Despite a slowdown in its Azure cloud business during the quarter, the company expects growth to accelerate in the second half of fiscal 2025.

Microsoft, like other major tech companies such as Alphabet (GOOG), is under investor pressure to demonstrate returns on its AI investments. Microsoft remains one of the few companies that provides clear reporting on AI contributions in its earnings. Last month, the company restructured its reporting, moving some search and news advertising revenue under the Azure cloud unit. Whether these moves will secure Microsoft’s venerable position within the global tech industry remains to be seen.

Intel Making Moves

Intel (INTC) is also making major moves. The firm has secured Amazon (AMZN) Web Services as a major customer for its semiconductor manufacturing business, meaning the two companies will co-invest in developing a custom chip for artificial intelligence, utilising Intel’s advanced 18A process. This multibillion-dollar partnership represents a significant advance for Intel, boosting its efforts to compete in the AI space.

Following the announcement, Intel's stock surged almost 6.4%. The deal is part of Gelsinger’s broader strategy to transform Intel into a foundry business, producing chips for external clients. However, the company is also scaling back expansion plans in Europe and focusing on U.S. operations due to financial pressures. Additionally, Intel expects to receive up to $3 billion in U.S. government funding for military chip production. (Source: Bloomberg)

Conclusion

As the market navigates volatility ahead of the Federal Reserve's rate decision, tech giants like Microsoft and Intel are making strategic moves to secure future growth. However, as savvy market watchers may have concluded already, nothing is certain when it comes to how things will play out in the trading sessions ahead. Investors and traders alike will have to wait and see.