3.5% premarket losses weigh on memory chip stocks after Alphabet results
Key Facts
Memory chip stocks fell in premarket trading on Thursday, October 29, after Alphabet’s results came in below the average analyst forecast and revived concerns about the cost of expanding in artificial intelligence. Micron shares fell 3.5%, SanDisk shares fell 3.61% and SK hynix shares fell 2.09%, according to a TipRanks report. Reuters reported that Micron fell 3.3% in early trading, while Nasdaq futures declined about 1%. Alphabet shares had fallen more than 10% in after-hours trading, according to a correction to an Associated Press report. But the premarket move did not carry through in Korea, where SK hynix shares ended Thursday’s session higher.
Alphabet’s third-quarter revenue reached $127.58 billion, up 25% year over year, but below the average analyst forecast of $127.97 billion. The company also reported earnings per share of $2.12, compared with expectations of about $3.01, according to the Associated Press. Net income fell to $26.17 billion in the July-to-September period from $34.98 billion in the same period last year. By contrast, Google Cloud revenue rose 103% to $30.7 billion, while search and other advertising revenue increased 12% to $63.3 billion. YouTube advertising revenue also grew 9% to $11.2 billion, putting growth in cloud computing and advertising alongside the decline in net income and the earnings miss.
Spending plans added to investor concerns about returns on artificial intelligence investments: Alphabet posted negative free cash flow of $9.1 billion in the third quarter, while analysts had expected it to be close to break-even. The company said it intends to increase capital spending substantially in 2027 compared with its 2026 forecast of $195 billion to $205 billion, according to Reuters. Those concerns coincided with a TipRanks report that linked pressure on memory stocks to Alphabet’s results, Microsoft’s lower-than-expected capital spending and Samsung’s results. The figures show Alphabet’s results combining strong growth in cloud and search advertising revenue with negative free cash flow and higher spending plans. Micron and SK hynix shares had risen in the previous session after the South Korean company reported strong quarterly results, before memory stocks came under pressure in early trading.
Samsung reported record operating profit of 107.4 trillion won and record revenue of 195.3 trillion won in the third quarter, driven by demand for memory chips used in artificial intelligence systems, according to the Associated Press. Even so, its shares fell 4.1% in the October 29 session and closed at 232,000 won. By contrast, SK hynix shares rose 2.6% to 1,526,000 won, according to Aju Press. SK hynix reported quarterly revenue of 104.6155 trillion won, operating profit of 83.3338 trillion won and net profit of 39.7756 trillion won. Revenue rose 32% and operating profit increased 38% from the previous quarter, according to the company’s results, leaving its closing share performance at odds with its early-trading losses.
SK hynix said it expects demand to continue exceeding supply in the memory market through 2030, and that HBM4 will become its main product beginning in the fourth quarter of 2026, surpassing HBM3E in shipment volume and revenue. That forecast puts the company’s record results in the context of demand it expects to remain above supply in the coming years. In an anticipated development on the same day, SanDisk announced that its fiscal first-quarter 2027 earnings conference will be held on Thursday, October 29, at 1:30 p.m. Pacific time. The company’s announcement did not include analyst forecasts for revenue or earnings per share. Its results will offer another point to watch for memory-related companies after sector shares diverged between premarket trading and the close in Korea.