To The Moon

Big-Tech’s Performance

Big Tech earnings week was accompanied by a much more volatile market with the Fed's FOMC meeting.Several of the giants had their own poor earnings performances, but while the AI-enhanced results still exceeded expectations, it was the different other businesses that diverged a bit with the inter-industry trends.

By the close of trading on August 1, all of the big techs closed lower this past week.The best performer was earnings-added $Meta Platforms, Inc.(META)$ +9.78%, then $Alphabet(GOOG)$ $Alphabet(GOOGL)$ +2.08%, $Amazon.com(AMZN)$ +2.35% however plunged back down after earnings, $Apple(AAPL)$ +0.4%, $Microsoft(MSFT)$ -0.31%, $NVIDIA Corp(NVDA)$ -2.73%, and $Tesla Motors(TSLA)$ -1.54%.

Big-Tech’s Key Strategy

Poor Consumeptions, Weak Amazon?

The scale effect of giants can help them still gain advantages in industry-sensitive cycles, for example, the same social media advertising, META's stability is better than $Snap Inc(SNAP)$ and $Pinterest, Inc.(PINS)$ .

However, there are some industry-wide declines that the giants can't help.Consumer industry in this earnings season collective "street": Starbucks, L'Oreal, Estee Lauder, the collective decline, Procter & Gamble, Nestle and other food growth but also less than expected. Amazon is in the e-commerce industry, not only has the industry's internal competition, but also have to suffer into the body of the consumer industry as a whole to go down the impact.There are a number of reasons for this

1. Excess savings since the epidemic have been pretty much depleted, especially among low- and middle-income households;

2. Consumers have become increasingly price-sensitive, including consumer goods giants who have had to resort to low-pricing strategies to secure sales, e.g., $McDonald's(MCD)$ McDonald's $5 value deal packages;

3. Downward movement of headline inflation, and upward movement of the unemployment rate

4. Decline in non-essential purchases, leading to a downward trend in overall selling prices, with customers choosing between prices, including high-priced non-essential electronics, etc

Amazon's Q2 earnings report still exceeded market expectations in the AWS piece.However, its main e-commerce business has been declining, with economic uncertainty, changes in customer spending behavior (lower ASP), and rising logistics costs all impacting the business.

In addition, competition from Temu, Tik Tok, Shein, etc. is also pulling it into the "low price" competition, especially since Amazon recently adjusted its seller fees, and some sellers have changed their sales strategy, which also compresses revenue in the short term.

Finally, from the valuation point of view, Amazon's current profit multiple is also ranked high among large technology companies, reaching 43 times, considering its margins still have room for further adjustment, with the current growth rate, the forward PE of 2025 is about 32 times, which can't be considered cheap.But if the e-commerce sector becomes more competitive next, or if consumer goods performance continues to decline, that could come under pressure.

Big-Tech Portfolio

The Magnificent Seven form a portfolio (the "TANMAMG" portfolio) that is equally weighted and reweighted quarterly.The backtest results are far outperforming the $S&P 500 ETF(SPY)$ since 2015, with a total return of 1953.22%, while the $S&P 500 ETF(SPY)$ has returned 212.73% over the same period and continues to pull back.

With the broader market hitting new highs this week, the portfolio's year-to-date return of 29.80% outpaced the SPY's 14.97%.

Over the past year the portfolio's Sharpe Ratio has fallen back to 1.8 compared to SPY's 1.3 and the portfolio's Information Ratio is 1.4.