To The Moon

Let us review the earnings of the Big Tech ~ Apple, Amazon, Alphabet, Microsoft & Meta.

I would prefer to have Tesla included in the group above but let us work based on the list.

The following section is from Twitter user The Kobeissi Letter:

About AI hype

Here are the 7 stocks accounting for all of the S&P 500’s gain this year:

$META, $AMZN, $MSFT, $AAPL, $GOOGL, $NVDA and $TSLA.

The chart below really displays how important tech stocks have become. The S&P 500 has substantial exposure to the AI hype.

The top 20 stocks in the S&P 500 carry 29% of the index’s weight.

However, they are accounting for 95% of the S&P 500’s YTD performance. $AAPL and $MSFT alone drive nearly 25% of this year’s gain in the S&P 500. A diversified index is proving to be not so diversified.

My investing muse

About 70% of the top businesses (in S&P500) excluding the top 20 barely contributed (0.47%) of the S&P500 return. With more folks turning to ETF like SPY, the story could be even more lopsided. When people invest in the

From the earnings of these Big Tech (Apple, Amazon, Alphabet, Microsoft & Meta), we can see that these companies are doing well, much better than the rest of the market. Thus, it is not surprising to learn that these companies carry significant weight in various indices like NASDAQ & S&P500. The notable fact is not that these Big Tech are doing well but rather most of the rest (of S&P500) are not doing as well. These are some of the “top performing” companies in the US market.

The entire S&P500 has risen 7.55% but the top 20 companies account for 7.05% (from the 7.55% rise). This implies that the rest of the 480+ companies account for 0.55% of S&P500 (from the 7.55% rise).

From Visual Capitalist article:

Microsoft invested $10 billion into OpenAI, the creators of ChatGPT. It has also integrated generative AI into its search engine Bing. This large language model is designed specifically to make search capabilities faster, generate text, and perform other automations.Also of interest is NVIDIA, which is the most valuable chipmaker in America. It sells $10,000 chips called A100s that allow machine learning models to run. These models perform multiple tasks simultaneously to develop neural networks and train AI systems, including OpenAI’s ChatGPT. Companies that are developing AI-related services, such as chatbots or image generation, may use up to thousands of these chips.

Despite being the world’s most valuable company and a key driver of returns, Apple is an outlier among tech giants with no major projects announced in AI (so far).Without the AI-led rally, the S&P 500 would be returning -1.4%. as of May 17, 2023.

Most of the stocks above have some involvement with the AI-craze. It is evident that AI is the next craze. Not every AI company will make it in the end. Thus, I recommend investing in companies that are at least profitable.

The background info below is compiled by Google Bard ~ which I find to be more current than ChatGPT. It is not surprising to learn that Big Tech is tanking the entire S&P500.

<From Google Bard>

Here is a summary of the Big Tech earnings in Q1 2023 and their outlook for the rest of the year:

• Apple beat analyst expectations for both revenue and earnings, reporting $97.3 billion in revenue and $1.52 in earnings per share. The company also announced that it had sold 5.5 million iPhones in the quarter, which was up 1.8% from the same period last year. Apple's outlook for the rest of the year is positive, with the company expecting revenue to grow between 4% and 8%.

• Amazon missed analyst expectations for both revenue and earnings, reporting $103.4 billion in revenue and $9.53 in earnings per share. The company's revenue was down 1.6% from the same period last year, while its earnings were down 17%. Amazon's outlook for the rest of the year is mixed, with the company expecting revenue to grow between 3% and 7%.

• Alphabet beat analyst expectations for both revenue and earnings, reporting $68.01 billion in revenue and $10.68 in earnings per share. The company's revenue was up 23% from the same period last year, while its earnings were up 23%. Alphabet's outlook for the rest of the year is positive, with the company expecting revenue to grow between 20% and 23%.

• Microsoft beat analyst expectations for both revenue and earnings, reporting $49.4 billion in revenue and $2.22 in earnings per share. The company's revenue was up 18% from the same period last year, while its earnings were up 22%. Microsoft's outlook for the rest of the year is positive, with the company expecting revenue to grow between 12% and 14%.

• Meta beat analyst expectations for revenue, but missed expectations for earnings, reporting $28.6 billion in revenue and $2.20 in earnings per share. The company's revenue was up 6% from the same period last year, while its earnings were down 21%. Meta's outlook for the rest of the year is mixed, with the company expecting revenue to grow between 3% and 11%.

Overall, Big Tech earnings in Q1 2023 were mixed. While some companies, such as Apple and Alphabet, beat analyst expectations, others, such as Amazon and Meta, missed expectations. The outlook for the rest of the year is also mixed, with some companies, such as Microsoft, expecting strong growth, while others, such as Meta, are more cautious.

Here are some of the factors that could affect Big Tech earnings in the rest of 2023:

• The global economy: The global economy is facing a number of headwinds, including rising inflation, interest rates, and the war in Ukraine. These factors could weigh on consumer spending and corporate profits, which could hurt Big Tech earnings.

• The tech industry: The tech industry is facing a number of challenges, including rising competition, regulatory scrutiny, and supply chain disruptions. These factors could also hurt Big Tech earnings.

• The stock market: The stock market is volatile and could experience further declines in the coming months. This could hurt Big Tech earnings, as the value of their stock-based compensation would decline.

Please note that these figures are for the most recent quarter, which ended in March 2023.

What do these ratios mean?

• P/E ratio is a measure of how much investors are willing to pay for a company's stock relative to its earnings per share. A higher P/E ratio means that investors are more optimistic about the company's future earnings.

• EPS is a measure of a company's earnings per share. It is calculated by dividing the company's net income by the number of outstanding shares.

• P/S ratio is a measure of how much investors are willing to pay for a company's stock relative to its sales per share. A higher P/S ratio means that investors are more optimistic about the company's future sales growth.

• Long term Debt to equity is a measure of a company's financial leverage. It is calculated by dividing the company's long-term debt by its shareholders' equity. A higher long term Debt to equity ratio means that the company is more reliant on debt to finance its operations.

• Quick ratio is a measure of a company's liquidity. It is calculated by dividing the company's current assets by its current liabilities. A higher quick ratio means that the company is more likely to be able to meet its short-term obligations.

• RoE is a measure of a company's profitability. It is calculated by dividing the company's net income by its shareholders' equity. A higher RoE ratio means that the company is more profitable.

• RoC is a measure of a company's profitability. It is calculated by dividing the company's net income by its total assets. A higher RoC ratio means that the company is more profitable.

@TigerStars

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