🐝 I just sent out my 82nd Weekly Buzz, with now over 160,000 words written and over 400 hours spent covering primarily the Big Tech companies... so as we wrap up earnings week, I feel I’m in a good position to observe the common themes both over this quarter and over the past ~2 years. 🔍 Here are some of my observations: - One obvious winner of the week, although they didn’t record earnings, was Nvidia ($NVDA). Microsoft, Alphabet, Amazon, and Meta are all rapidly increasing capex as the AI arms race continues to heat up (spending $95B this quarter compared to <$30B in 2021). As long as this continues, Nvidia will continue to benefit big (see image 1). - Meta ($META), Microsoft ($MSFT), Alphabet ($GOOGL), and Amazon ($AMZN) have all solidified and doubled down on their AI strategies (see second image) while Apple is still struggling to find its place in the race. All companies beleive AI is still in the early stages. - Personally, I own Nvidia ($NVDA), Meta ($META), and Microsoft ($MSFT) (making up 21% of my portfolio including my S&P 500 holdings). For the past 6 months, these have significantly outperformed the rest of Mag 7 and I continue to beleive these 3 are the strongest of the 7 after this quarter. - Can the good times continue? While AI has certainly driven significant profit growth, it still hasn’t been enough to keep pace with the spending spree. Despite this, investors have rewarded the spending with higher valuations, so to some, it has created a bit of a ‘speculative frenzy’ in the market. - I also worry that, while AI definitely seems to be transformative, the hype and ‘spend at all costs’ mentality do seem to resemble the dot-com bubble era, and so even though I beleive in the long-term potential, I worry the market will continue to be very volatile in the near term. - The challenge with a ‘speculative frenzy’ is that if you’re in one, it’s nearly impossible to know how long it could last. Many commentators were saying the market was in a bubble 2 years ago. - A very interesting dynamic of the current markets (that makes it a bit different than dot-com) is that when there is a dip, retail investors (like you and me) rush to buy, which has softened many of the pullbacks from institutional investors dumping stock. - As for me, I plan to stay the course and continue holding some of my favourite tech stocks while increasing my portfolio diversification to hedge against the volatility (i.e., with my recent buy of $ZEA to boost my international exposure) and plan to buy a Utilities ETF (any recommendations?) and a bit more S&P 500 on Monday. 🤔What do you guys think? Anything you disagree with? P.S. will link my full write-ups on the Big Tech earnings week in the comments!
