Apple & Amazon Lack AI Reliance

Investors seem to expect consumer demand will remain strong, aiding tech companies that are not as reliant on AI.

Apple: Divergent Views on Earnings

The iPhone manufacturer has managed to avoid the AI-related slump in tech, with its share price trending upwards in the days leading up to its earnings release. However, analysts seem to disagree on expectations, with some sounding bullish while others have downgraded price targets. The differing views appear to revolve around how the company is addressing a slump in sales. Both sides agree that Apple will be "weak" in terms of revenue with the staggered release of AI for the latest iPhone, which is facing low demand in key markets like China. Nevertheless, more optimistic analysts point to the company's strong gross margin and growth in services as potential factors to offset weaker demand.

Apple will report earnings after the market closes on Thursday, with analysts' consensus being that the bottom line will come in at $2.34 per share, up from $2.18 per share reported in the same period last year. Sales are expected to increase by just 3.7% to $124 billion. Traders are likely to focus on sales metrics, particularly those related to China, and the company's guidance on demand for its latest smartphone. Apple is notably facing increased competition in China as its AI technology has not managed to pass regulatory hurdles there.

Amazon High in the Clouds

Amazon, known as an e-retailer giant, has reason to be optimistic about its revenues due to generally resilient consumer sentiment in its primary market, the US. However, the company has seen its best results from its cloud unit, AWS, with analysts likely to focus there as cutting-edge AI demands more cloud storage space. The higher margins from the online storage division are expected to support a disproportionately large gain in the company's bottom line.

Amazon will report a week from now on Thursday aftermarket, and analysts expect its EPS to jump to $1.48 per share from $1 per share a year ago, with sales rising 10.2% to $187.3 billion. Analysts remain generally upbeat about Amazon's outlook, with a growing US economy contributing to the top line and no signs of easing demand for cloud storage, which has helped prominent tech investors pick up more shares ahead of the earnings. As a result, traders are likely to focus on the company's sales guidance and any insight into whether the recent disruption in the AI space will affect demand for cloud storage.

Apple's Looming H&S Pattern

Apple's pattern suggests an ongoing head-and-shoulders (H&S) pattern, which could signal potential downside risks once it reaches the right shoulder at a price of nearly $240 per share. The reversal pattern that peaked at $260 hints at more profound implications, as failure to move higher could break the $232 and $225 short-term supports and extend to the neckline near $220, followed by lower declines. On the flip side, breaking past the upper neckline might trigger further continuation above $245 and the record peak, suggesting a double-bottom formation instead.

Source: SpreadEx / APPLE

Key Takeaways

While investors expect strong consumer demand to aid Apple and Amazon’s less-reliant revenue model on AI, varying views on Apple's earnings and the potential impact of AI disruption on Amazon's cloud services add uncertainty. Monitoring sales metrics, guidance and technical patterns will be crucial for traders and analysts alike as they assess the companies' performance and prospects in the recovering tech arena.