July 31 (Reuters) - Nasdaq futures led gains on Friday, with Amazon's shares jumping 11% after the Big Tech company joined some of its peers in delivering strong cloud revenue growth, putting to rest concerns about AI returns.
Limiting some optimism, Apple warned that supply constraints would hurt growth, prompting investors to look beyond near-term shortages to gauge the hit from an expected iPhone price hike as its shares dropped 7.8% in premarket trading.
This week was what some analysts called the 'make-or-break' week for the tech sector that had been rattled by investors taking some profits through July following a strong end to the second quarter, as they awaited signs that investments made by AI leaders at the expense of free cash flow were paying off.
Amazon reported its biggest revenue growth in over four years for the previous quarter on Thursday, joining similar reports from Microsoft and Alphabet earlier this month, prompting investors to look past the big drop in cash flows that the companies also logged.
"It is no longer enough to beat overall estimates; companies must also reassure investors about the drivers of future growth," said John Plassard, head of investment strategy at Cité Gestion.
"Ultimately, Amazon confirms that the momentum in artificial intelligence continues to support the hyperscalers, while Apple reminds us that its main challenge now remains accelerating its AI strategy while sustainably reviving its growth in China."
Shares of Microsoft dipped 0.6% after logging its biggest one-day gain on record for a company in the previous session, while Alphabet, Meta and Tesla rose above 1% each. Chip stocks Nvidia climbed 1.2% and Micron gained 4.4%.
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