To The Moon

Big-Tech’s Performance

Big-techs are releasing their Q2 eearnings this week, beats are the common sense.

However, due to differences between investor expectations, individual stocks showed significant disparities, leading a volatility.

$DJIA(.DJI)$ halted its 13-day-rising on Thursday. As of the close on July 27th, the strongest performers of the week were $Alphabet(GOOGL)$ with a +8.65% gain, reaching a new high for the year, followed by $Meta Platforms, Inc.(META)$ with +3.04%, and $NVIDIA Corp(NVDA)$ with 0.83%.

$Apple(AAPL)$ stands flat, while $Amazon.com(AMZN)$ $Tesla Motors(TSLA)$ and $Microsoft(MSFT)$ recorded negative returns.

Big-Tech’s Top Newsfeed

- Apple faced a $1 billion collective lawsuit in the UK over the "Apple Tax."

- iPhone 15 component orders declined by over 8% compared to the previous year,

- $Spotify Technology S.A.(SPOT)$ Q2 earnings missed, but plans to raise prices in North America.

- The FTC is preparing to file an antitrust lawsuit against Amazon.

- Amazon announced a nearly 15% reduction in the acquisition price of robot manufacturer iRobot.

- Google reported better-than-expected Q2 earnings, especially in its advertising business, and raised its annual guidance.

- Google, Microsoft, and OpenAI collaborated to launch an AI industry forum for cutting-edge models.

- Microsoft reported Q2 earnings, with a slowdown in cloud business growth and AI monetization not yet fully reflected.

- Meta's Q2 earnings exceeded expectations, with revenue growing by 11% and EPS rebounding.

- It is expected that NVIDIA will secure 144,000 to 150,000 wafers out of 240,000 wafers in $Taiwan Semiconductor Manufacturing(TSM)$ CoWoS production capacity for 2024.

- $Intel(INTC)$ , NVIDIA, and $Qualcomm(QCOM)$ CEOs urged the US government to research the impact of export restrictions on China and suspend actions.

- Intel's Q2 earnings and Q3 guidance exceeded expectations, driven by increased demand for AI.

Big-Tech’s Key insights

Microsoft and Google's diverged, due to differing market expectations.

Google's stock surged after the release of their financial report, exceeding market expectations.

• The rebound in their advertising business surpassed predictions, and their YouTube division experienced growth, reaffirming their advantage in short video competition.

• Additionally, their cloud business showed a remarkable recovery in growth, surpassing Microsoft's Azure growth rate for the first time since Q3 2021.

• Google's profit margins reached new highs due to cost-cutting measures, with gross margins reaching their peak in 2021.

• The market expects Google's advertising to monetize AI earlier than Microsoft.

On the other hand, Microsoft's stock declined despite surpassing market expectations.

• The company's massive size contributed to the slowdown in growth for their PC and cloud businesses.

• revenue contribution from AI was negligible, and Microsoft's Edge browser failed to gain significant market share, falling short of expectations.

• The growth guidance provided by Microsoft indicated stagnation or deceleration compared to the previous quarter.

It's worth noting that Q2 is not the time for a direct comparison of AI performance between these two companies. The current fluctuations in their stock prices are more a realization of prior market expectations.

Microsoft has indeed benefited more from AI this year compared to Google, which is why investors are pricing out when they perceive AI monetization to be slow for Microsoft and compensating for Google's underestimated performance.

Nonetheless, Microsoft's overall performance remains commendable, and the next quarter holds the potential for additional revenue from Office Pilot products, which boast high-profit margins.

META soared on Q2 Earnings, with Reels significant success.

Just like Google, META relies heavily on advertising as its primary revenue source.

• The better-than-expected performance can be attributed to both macroeconomic factors and increased advertising platform efficiency, leading to a stronger suction effect on smaller platforms.

• Moreover, the slowed competition from TikTok allowed Reels' commercialization progress to exceed expectations, despite its lower advertising prices.

• META's recently launched product, Threads, aimed at competing with Twitter (X.com), has gained rapid user traction, primarily due to its robust and extensive social media ecosystem. Once the user base stabilizes, monetization efforts can begin.

In terms of valuation, META's forward price-to-earnings ratio for 2024 is 20 times based on an EPS estimate of $15.5, while the industry average is 23.5 times, indicating potential for further upward movement in stock prices.

Why are tech stocks experiencing a pullback despite impressive financial reports?

This week, the Nasdaq 100 Index underwent a weight adjustment, with the top seven companies seeing a decrease in their weight while smaller companies' weights were increased. This impact is usually completed within a day or two, with some funds making adjustments earlier.

The pullback in tech stocks is influenced by macroeconomic factors. The upward revision of GDP data reduces recession expectations, providing support for further tightening measures.

Additionally, the European Central Bank's indication of a possible pause in interest rate hikes led to a decline in the euro and a surge in European stocks, driving up European bond yields and attracting more capital.

Moreover, the divergent performance of major tech companies during the earnings season has increased investors' concerns about risks, leading to early profit-taking.

The Big-Tech Portfolio

The "TANMAM" portfolio, composed of the seven largest tech companies, outperformed the S&P 500 significantly since 2015, with a total return of 1523.9% compared to the $SPDR S&P 500 ETF Trust(SPY)$ return of 257.0%.

The portfolio's annualized return of 37.35% outperformed SPY's 11.62% since its inception in 2015.

Moreover, the portfolio achieved a 90.83% return since the beginning of 2023, surpassing SPY's 19.22% return during the same period.

In July, the portfolio achieved a 2.47% return, exceeding SPY's 2.08% return.

The overall outlook for the tech industry remains promising, with some companies outperforming market expectations and showcasing substantial growth in their core businesses.