The Nasdaq rose last week. But the technology may be in trouble

Google office in New York on February 2, 2023.

Ed Jones | Afp | Getty Images

This report is from today’s CNBC Daily Open, our new international markets newsletter. CNBC Daily Open brings investors up to date on everything they need to know, wherever they are. Do you like what you see? You can subscribe here.

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

  • China wants to reach “around 5%” growth in 2023. That’s the word from Premier Li Keqiang, who spoke at China’s National People’s Congress yesterday. A draft budget at the congress revealed that the country will increase defense spending by 7.2% to 1.56 trillion yuan ($230 billion).
  • US stocks 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 targets for this year.
  • Bard, Google’s artificial intelligence engine, is “not search,” Bard product manager Jack Krawczyk told Google employees. Bard’s magic is instead more of a “creative companion”. Employees told CNBC they are confused by Google’s sudden pivot.
  • PRO This week, Federal Reserve Chairman Jerome Powell will speak about the economy before Senate committees, and the February employment report will be released. Economists expect one of these to be a major market move; the other, not so much.

Helped by Fed official Raphael Bostic’s dovish comments and a decline in Treasury yields, US stocks managed to shrug off the pessimism and rallied to end the week in the green.

The Dow Jones Industrial Average rose 1.17%, giving it a 1.75% weekly gain that snapped its four-week losing streak. The S&P 500 rose 1.61%, a weekly gain of 1.9% on the week. The tech-heavy Nasdaq Composite climbed 1.97%, ending the week 2.58% higher. It is two months in a row that the Nasdaq has outperformed the other indices.

Not that everything is rosy in the technology industry. Amazon stopped building “HQ2”. Meanwhile, Meta is throwing more money at its loss-making Reality Labs segment. The firm slashed the cost of its virtual reality headsets — by up to $500 on its high-end Meta Quest Pro — in a bid to boost sales.

Not all is well in the much vaunted realm of artificial intelligence chatbots either. Google abruptly pivoted from its search-first strategy to position Bard as more of a companion to “explore your curiosity,” Krawcyzk told employees, which left them scratching their heads.

Maybe it’s just really hard to integrate unpredictable AI chatbots with something as fact-based as web search. Remember the fiasco surrounding Microsoft’s AI chatbot Bing, which threatened users and professed its love for them. (To Bing’s credit, that’s remarkably human behavior.)

Despite the Nasdaq’s stellar performance so far this year, it remains to be seen whether the promise of technology will match the reality – and translate into further gains for the index. Companies should be careful not to fool around for too long: In today’s high interest rate environment, investors don’t have as much patience as they did a few years ago.

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