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'Fast Money' traders look ahead to next week's big tech earnings

CNBC Television • 4:18 minutes • Published 2025-07-18 • YouTube

🤖 AI-Generated Summary:

Key Points and Main Takeaways from Market Analysis Video:

Market Context & Positioning

  • Both major indices set intraday records but ended with slight losses
  • Market positioned with expectation that tariff impacts will be less of a headwind than previously anticipated
  • Earnings expectations from analysts and investors have moved higher, creating potential caution

Google/Alphabet Investment Analysis

Performance Gap:
* Google has significantly underperformed other "Magnificent Seven" tech stocks
* Has delivered roughly half the returns of Microsoft over the past 3 months
* Now part of reduced "Mag 3 or 4" group rather than full Mag Seven

Positive Setup Factors:
* Attractive valuation, even relative to its own historical metrics
* Easy comparison periods (comps) for upcoming earnings
* Expected improvement in ad spending with clearer tariff outlook
* YouTube positioned as a potential bright spot
* Cloud business performance described as "fine"

Critical Focus Areas for Upcoming Earnings

For Google Specifically:
* Whether incumbent search business has staying power
* Plans for transitioning to AI-driven search capabilities
* Ability to defend market position against AI disruption
* Capital expenditure (CapEx) spending insights and future plans

Broader Tech Sector Concerns:
* When massive AI-related CapEx investments will show returns through margin expansion
* Need to see actual monetization of AI investments at some point
* Risk that AI search features may cannibalize traditional ad revenue

Investment Strategy Implications

  • Focus shifting back to company fundamentals rather than macro factors
  • Google's cheaper valuation may have already discounted AI disruption concerns
  • Mega-cap tech earnings remain crucial driver for continued market rally
  • Investors scrutinizing whether companies have legitimate AI transition plans

Key Risk Factor

  • Main concern for Google: AI search integration potentially reducing traditional search ad revenue, which is their primary business driver

📝 Transcript (154 entries):

also set an intraday record, both it and the Dow end of the day with slight losses. But we'll next week's results fuel the fire for stocks or put an end to their record rally. Tim what do you think we're going to get an awful lot of reads from. Yes big tech. But like we mentioned Coca-Cola General Motors reads really across the board. What should we be expecting? How do we position. >> Well, I think the market is certainly positioned that that the tariff impact is, is less than a headwind than we thought going into Q1, or at least expecting Q1 earnings, I should say. And so it's a very different backdrop, and I think it sets the market up for possibly a little bit more caution here as we really get into the meat of it. But, you know, if we talk about Google, this is a company that has really underperformed the rest of the mag seven. It's probably done half of what Microsoft has done over the last three months. And I and I think that that set up is actually quite good. Comps are easy. I think there's better ad spend with a little more clarity around tariffs. I think what we've seen in terms of their cloud business, it's fine. I think YouTube's going to be a bright spot, and I think the company itself is priced at least attractively, even relative to itself. Given the backdrop of where people are always concerned about where multiples are coming in. So it's a it's a big week. I do think that the earnings expectations overall from the analyst community, from the investor community have have moved higher. And I think that's something that needs to be watched. >> By anyone. I'm sort of looking forward to some focus on the fundamentals when it comes to companies, rather than perhaps the big macro picture. Although it is impossible to separate the two all the time. What are your expectations? Do you agree with what he's talking about? With sort of the difference in Google and Microsoft? Does Google have some ground to make up based on what they tell us? >> Well, in terms of performance, they certainly do. You know, it's trailed the Mac seven is now the Mac 3 or 4. And that continues to kind of we see switching in and switching out of who those top performers are there. I think with the alphabet story, it really is going to be about whether or not their incumbent search business has the legs necessary and whether or not they are setting up to transition into a kind of driven search, and they can kind of defend ground there. Again, I don't think it's necessarily important that they get it right this quarter. But I do think being that they've been under scrutiny, that investors are really going to be looking under the hood to see whether or not they have, you know, a legitimate answer to what their plans are going forward. The other thing that I think you're going to start to kind of see is insight into CapEx spend. And we have had this kind of a resurgent if you start to see a bit of pullback in CapEx or CapEx related plans, perhaps people think twice about that. But I think ultimately we do want to see the earnings from these tech players, the mega caps, because them and the AI adjacent plays have really been what's really been what have taken us to this next leg higher. >> Yeah, so many interesting points there. Of course, I Courtney, has been sort of this key phrase that everybody wants, wants to say and be a part of. When will we see some of that CapEx that's been plowed into AI by some of these big names, really start to show some dividends in the form of margin expansion. Do we need to see it this quarter? Will that separates the wheat from the trough? I don't know if you need to see it this quarter, but we do need to. >> See. >> It at some point. I mean, that is the concern is that there is so much capital expenditure at the moment, but we don't know at what point you're actually going to see them monetizing that. And I do think when you're looking at Google, who's going to be reporting next week, their their valuation is much cheaper than some of your others. So I think some of this has been discounted because people are a little concerned about the fact that their search business is the main driver of their business, and that I might start to cannibalize that. Anytime you go to Google, the first thing that comes up is that I search. A lot of people are using that, and that's going to diminish their ad revenue. And I think that is why the valuation has come down so much. And so we need to see when they're reporting earnings.