Why Did Amazon, Apple, and Oil Stocks Rise?

TL;DR

Amazon shares surged after AWS revenue grew 20%, while Apple projected double-digit iPhone growth during the current quarter and reported strong demand for the iPhone 17. Exxon and Chevron also exceeded earnings expectations as higher oil production supported results, helping lift market sentiment despite Brent crude heading toward its worst annual decline in 50 years.

Transcript

Welcome to Yahoo Finance's flagship show, The Morning Brief. I'm Julie Hyman. Let's get to the three things you need to know today. First up, Amazon shares jumping today after a blowout quarter. The stock is set to add $300 billion to its market cap after reporting the fastest cloud unit growth in nearly 3 years. On the analyst Call, CEO Andy Jasse... Read More

Key Insights

• Amazon’s AWS revenue grew 20% from the prior-year period, marking the cloud division’s fastest growth in nearly three years and exceeding the 19% threshold cited as important for changing investor sentiment about Amazon’s position among hyperscale cloud providers.
• Amazon’s Trainium 2 chip rental business is now a multibillion-dollar operation after growing 150% quarter over quarter. The result shows that Amazon is generating meaningful AI-related demand through AWS infrastructure, even as questions remain about the identity of its broader AI strategy.
• AWS data center power capacity has doubled since 2022, and Andy Jassy expects it to double again by 2027. Amazon plans to continue expanding capacity to meet customer demand, including demand associated with running artificial intelligence models on its chips.
• Apple expects double-digit iPhone growth in the current quarter and potentially its strongest quarter ever for iPhone sales. Management reported such strong iPhone 17 demand that the company was having difficulty shipping enough devices to keep pace with customers.
• The iPhone remains Apple’s largest revenue source, accounting for about half of company revenue. Better-than-anticipated results from Mac and wearables, along with services outperformance, supplemented the positive outlook produced by expectations for stronger holiday iPhone sales.
• Exxon and Chevron beat adjusted earnings expectations as production increases supported their quarterly results. Exxon exceeded the analyst forecast by 7 cents per share, while Chevron surpassed its forecast by 20 cents per share despite a difficult broader environment for crude prices.
• Technology earnings strengthened the market outlook, with Nasdaq futures indicating a gain of about 1.25%, S&P 500 futures rising about 0.75%, and Dow futures pointing roughly 60 points higher before the market opened.
• Portfolio diversification remains important despite strong returns from large technology companies. Edward Jones advised investors to align holdings with their goals, risk tolerance, and time horizon, while using market declines as opportunities to rebalance gains into less favored sectors.

Questions & Answers

Q: Why did Amazon shares rise after its earnings report?

Amazon shares rose because the company exceeded top-line and bottom-line expectations while reporting 20% revenue growth from AWS, its fastest cloud division growth in nearly three years. Investor enthusiasm was also supported by the Trainium 2 chip rental business becoming a multibillion-dollar operation after increasing 150% quarter over quarter. The stock was positioned to add about $300 billion in market value.

Q: How is artificial intelligence affecting Amazon’s AWS business?

Artificial intelligence is supporting demand for AWS computing infrastructure and Amazon-designed chips. Amazon said its Trainium 2 chip rental business had become a multibillion-dollar operation and grew 150% quarter over quarter. Anthropic also planned to use 1 million Amazon chips to run its models. Amazon intends to keep building data center capacity as it works to meet this customer demand.

Q: How much is Amazon expanding its data center capacity?

The power capacity of the AWS data center fleet has doubled since 2022, according to CEO Andy Jassy, and he expects it to double again by 2027. Management said Amazon would continue building infrastructure to meet demand. The expansion supports AWS customers, including companies renting Amazon’s Trainium chips and using the cloud platform to run artificial intelligence models.

Q: Why was Apple’s holiday sales outlook encouraging to investors?

Apple forecast double-digit iPhone growth during the current quarter and indicated that the period could become its strongest ever for iPhone sales. Management said demand for the iPhone 17 was so strong that shipments could not keep pace. That outlook eased concerns about Apple’s ability to return to stronger growth after prior-quarter iPhone sales came in slightly below expectations.

Q: What factors are supporting demand for the iPhone 17?

Demand is being supported by several factors identified in the discussion, including physical design changes to the Pro models, the base iPhone 17’s perceived value, and customers replacing phones purchased in 2020 after about five years. A cited research report also showed 14% year-over-year growth versus the iPhone 16 during the first 10 days of availability in the United States and China.

Q: How important is the iPhone to Apple’s overall business?

The iPhone remains Apple’s largest money maker and accounts for about half of the company’s revenue. That concentration makes the projected double-digit growth in current-quarter iPhone sales especially important to investors. Apple also received support from better-than-anticipated Mac and wearables performance, while services outperformed, but the iPhone continues to be the company’s central revenue engine.

Q: Why did Exxon and Chevron beat earnings expectations?

Exxon and Chevron exceeded earnings expectations because increases in oil production helped strengthen their quarterly results. Exxon’s adjusted earnings per share came in 7 cents above the analyst forecast, while Chevron’s result exceeded expectations by 20 cents per share. Their performance occurred as OPEC Plus pursued production increases to recapture market share and Brent crude faced a severe annual decline.

Q: How should investors respond to strong big tech performance?

Investors should maintain portfolios that reflect their individual goals, time horizons, and tolerance for risk rather than concentrating exclusively in technology stocks. Edward Jones recommended broad diversification across multiple sectors, even while overweighting equities because of economic strength and expected AI productivity. Market declines can also provide opportunities to take gains and reallocate money toward less favored sectors.

Summary & Key Takeaways

• Amazon reported top-line and bottom-line beats as AWS revenue increased 20%, its fastest cloud growth in nearly three years. Its Trainium 2 chip rental business became a multibillion-dollar operation after jumping 150% quarter over quarter, while management emphasized continued data center expansion to meet demand from cloud and AI customers.

• Apple initially disappointed investors with slightly weaker-than-expected iPhone sales for the prior quarter, but its holiday outlook changed the market response. Tim Cook projected double-digit iPhone growth in the current quarter, citing strong iPhone 17 demand, supply constraints, attractive base-model value, design changes, and a five-year customer upgrade cycle.

• Exxon and Chevron surpassed adjusted earnings forecasts by 7 cents and 20 cents per share, respectively, as increased oil production supported quarterly performance. Meanwhile, strong technology earnings lifted stock futures, although advisers cautioned against concentrating portfolios in technology and recommended diversification based on each investor’s goals, risk tolerance, and time horizon.