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

By CNBC Television

TechnologyFinanceBusiness
Share:

Key Concepts:

  • Tariff impact on earnings
  • Big Tech earnings (Google, Microsoft)
  • Google's underperformance relative to other "Magnificent Seven" stocks
  • Ad spend and cloud business performance
  • YouTube's potential as a bright spot for Google
  • Earnings expectations and market caution
  • Fundamentals vs. macro picture
  • AI-driven search and Google's response
  • CapEx spend and its implications
  • Monetization of AI investments
  • Margin expansion
  • Google's valuation and concerns about its search business

1. Earnings Season Outlook and Tariff Impact:

  • The market is positioned as if the tariff impact is less of a headwind than initially anticipated for Q1 earnings.
  • This sets the stage for potential caution as earnings season progresses.
  • Reads across various sectors, including Big Tech (Google), Coca-Cola, and General Motors, are expected.

2. Google's Potential and Underperformance:

  • Google has underperformed compared to other "Magnificent Seven" stocks, specifically Microsoft, over the last three months.
  • This underperformance creates a potentially favorable setup for Google.
  • Factors supporting Google include easier comps, improved ad spend due to tariff clarity, and a decent cloud business.
  • YouTube is highlighted as a potential bright spot for Google.
  • Google's valuation is considered attractive, even relative to itself, given concerns about multiples.

3. Fundamentals vs. Macro and Google's Strategy:

  • There's a desire for a focus on company fundamentals rather than just the macro picture.
  • Google needs to demonstrate a legitimate plan for transitioning to AI-driven search and defending its position.
  • It's not crucial for Google to get it right this quarter, but investors want to see a clear strategy.

4. CapEx Spend and AI Monetization:

  • Insight into CapEx spend is crucial. A pullback in CapEx plans could raise concerns.
  • The earnings from tech players, especially mega-caps and AI-adjacent companies, have driven the market higher.
  • The key question is when the significant CapEx investments in AI will translate into margin expansion.
  • It's not necessarily expected this quarter, but it needs to happen at some point.

5. Google's Valuation and Search Business Concerns:

  • Google's valuation is cheaper than some of its peers, likely due to concerns about its search business.
  • There's a worry that AI search could cannibalize Google's traditional ad revenue.
  • The prominence of AI search on Google's platform could diminish ad revenue.
  • Upcoming earnings reports need to address these concerns.

6. Notable Quotes:

  • "The market is certainly positioned that that the tariff impact is, is less than a headwind than we thought going into Q1" - Tim
  • "...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."
  • "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."

7. Technical Terms and Concepts:

  • Magnificent Seven: Refers to a group of seven highly influential tech companies (likely including Google, Microsoft, etc.).
  • Comps: Short for "comparables," referring to the financial performance of similar companies or periods.
  • CapEx: Capital expenditure, referring to investments in fixed assets like property, plant, and equipment.
  • AI-driven search: Search technology powered by artificial intelligence.
  • Margin expansion: An increase in profit margin, indicating improved profitability.

8. Logical Connections:

  • The discussion starts with the broader market outlook, then narrows down to Big Tech earnings, specifically focusing on Google.
  • Google's underperformance is linked to concerns about its search business and the potential impact of AI.
  • CapEx spend is connected to the need for AI monetization and margin expansion.

9. Synthesis/Conclusion:

The upcoming earnings season, particularly for Google, is crucial. While the market anticipates a reduced tariff impact, Google faces pressure to demonstrate a clear strategy for AI-driven search, address concerns about its core search business, and show a path towards monetizing its AI investments and achieving margin expansion. Google's underperformance relative to its peers has created a situation where investors will be closely scrutinizing its earnings and future plans.

Chat with this Video

AI-Powered

Hi! I can answer questions about this video "'Fast Money' traders look ahead to next week's big tech earnings". What would you like to know?

Chat is based on the transcript of this video and may not be 100% accurate.

Related Videos

Ready to summarize another video?

Summarize YouTube Video