TL20 lags benchmarks
Year to date, the TL20 group of stocks to consider is down seventeen percent, worse than the twelve-percent decline of the Nasdaq and the seven-percent decline of the S&P 500. Read about the TL20
It’s a tale of two giants Friday morning. Alphabet’s report Thursday evening was the pick-me-up the market needed, with Alphabet stock rising by almost four percent in pre-market trading.
Intel’s report, however, was not a pick-me-up, it was a wake-up call to just how much more work there is to be done for the company’s turnaround.
First the good news: the results at Alphabet, and the commentary, showed no slowdown in either the advertising business nor the cloud computing business, the latter of which continues to have to race to add capacity to meet demand, the company said.
The irony of the present moment is encapsulated in the earnings report Wednesday evening of Texas Instruments, the diversified chip maker that serves automotive, industrial, consumer and many other markets for chips.
TI’s diverse chip market has been dogged by inventories and sluggish demand for quite a while. Last night, the company turned in the best upside relative to expectations in years, and the best quarterly forecast in years. Management said areas such as industrial equipment are finally coming out from under that inventory pile-up.
The irony is that the uncertainty of the tariff and trade situation obscures or even negates what should be a triumphant moment for the company. On the call with analysts last night, CEO Haviv Ilan said that his company was reviewing the history of events such as the “Y2K” shock of 2000, and the COVID-19 lockdowns, looking for precedents.
Following better-than-expected results Wednesday morning, AT&T CEO John Stankey took analyst questions, including many about tariffs and trade. As I had alluded to in this week’s podcast, there wasn’t a lot that Stankey could say about the current macroeconomic situation because there is a lot that he and other executives can only guess at regarding where the tariff train is headed.
By way of background, the report was better than competitor Verizon’s report Tuesday morning. In a note to clients, Moffett-Nathanson’s longtime telecom observer, Craig Moffett, lays out the situation. It’s a “zero-sum game” in the U.S. telecom market, he notes, and AT&T has been playing its hand better than Verizon has, scooping up subscribers with more adept use of promotions. “On virtually every metric, AT&T outperformed Verizon,” notes Moffett. He expects that this year, Comcast will be particularly “aggressive” in trying to poach subscribers from AT&T, Verizon and T-Mobile.
Earnings season is ramping into high gear this week, and the first few reports out this week show little in the way of anxiety about tariff and trade uncertainty. Most of the business trends seem to be the same, good or bad, as we saw before tariffs and trade became the focus.
I noted yesterday that broadband equipment provider Calix had a good quarter on Monday evening. Here are a few others from overnight.
Shares of Vertiv, makers of special cooling systems for data center equipment racks, are up nineteen percent in early trading after the company’s revenue and sales beat expectations. More important, the company’s outlook for this quarter’s revenue came in four percent above expectations, the best showing since August of 2023.
CoreWeave of Livingston, New Jersey, the eight-year-old provider of AI hosting services for those who don’t own GPU chips from Nvidia and want someplace to rent them, went public last month, in the middle of a turbulent market.
Happily for the firm, the reviews out today as analysts initiate coverage are split down the middle between bulls and bears, which is probably a lot better than could be expected for a new issue in this kind of market.
None of the analysts, that I can see, have anything like the deeply negative views that have circulated previously, such as one analyst likening the company to Enron.
The stock, at a recent $37.60, is below its $40 offer price, which was also its closing price on the first day of trading, March 28th. Most of the price targets being offered today are in a range of $46 to $55, which offers upside of twenty to forty-five percent, not bad.
Amidst the seesawing of the market the last couple of weeks, tech shares continue to get cheaper.
I noted on April 4th that many of the biggest tech names were cheaper than they had been six months prior, by ether a price-to-sales or a price-to-earnings multiple. Last night, I took a look at those same multiples as they’ve changed in the two weeks since that article, based on yesterday’s closing price.
As you can see from the scatter plot, which shows selected names plotted by the ratio between now and then, most names are below “1”, the value they had two weeks ago. A few, such as Netflix and Broadcom, have gotten more expensive.
The accompanying table shows the actual numbers, and the ratio, for almost a hundred companies. All the values in pink are valuation multiples that have declined relative to what they were two weeks prior.
The week that ended April 17th — an abbreviated week because of the U.S. Good Friday holiday — brought more pain, with the Nasdaq Composite Index down 3%, the Standard & Poor’s 500 down 2%. As I write this, both indices are still above where they were two weeks earlier, but not by much.
The earnings season kicks off in earnest this week, amidst plenty of uncertainty about the U.S.’s tariff regime, with fears of recession running high. We could be already in one, but even if we don’t get a recession, there’s the prospect of a “pause,” companies simply holding off on spending because they don’t know what’s going to happen next.
We’re heading into the thick of earnings season this week, with a rising number of companies reporting, including Alphabet and Intel — see the table below.
Amidst continued uncertainty about tariffs and trade, all the Street can do is mostly lower its expectations, and plan to hear little or nothing of any real value from CEOs and CFOs, who probably are just as unsure as everyone else about their industries.
Things are getting downsized Monday across the board.
Enphase, which dominates the market for home solar panel “micro-inverters,” where it competes with Tesla, will report results tomorrow, April 22nd, after market close. Its stock is the subject of two price target cuts today, from Canaccord Genuity’s Austin Moeller, and from Daiwa Capital Markets’s Jonathan Kees.
The first-quarter reporting season for tech is just getting underway this coming week, but it’s been a bruising affair thus far. Oracle is always the first to report in any given earnings season, and their report on on March 10th was a dud. Ciena, Adobe, Micron Technology and ASML all followed, with mixed performances, and poor stock performance.
Thursday of this week saw a little reprieve, two upbeat reports by Taiwan Semiconductor, the largest contract chip maker in the world, serving Nvidia and everyone else; and Netflix, both of which were well received. Taiwan Semi shares rose fractionally on Thursday, and Netflix rose in after-marketing trading Thursday following its report.
Taiwan Semi’s report showed no slowing down from any tariff and trade issues, as artificial intelligence continues to drive incredible results, with revenue rising thirty-five percent, year over year, to $26 billion (in New Taiwan Dollars). That’s fairly incredible growth at such scale.
In a world of continued uncertainty for tech — and everything else — there was little in the earnings report of chip-equipment maker ASML on Wednesday morning to decipher where things are going. The company has a monopoly on a very high-value piece of equipment, and it sells only a dozen or so units a year. Ergo, ASML can’t possibly reflect everything that’s happening with tariffs and trade.
The stock sank eight percent Wednesday, but probably not over the report but rather what’s happening to the chip market. Nvidia shares fell ten percent after it said in a filing that increased restrictions on sales to China meant Nvidia will have to take a nearly six-billion-charge for the quarter ending this month. (Advanced Micro Devices also warned of the hit to its revenue.)
“I have a ton of PowerPoint qubits in 2035, as many as anybody, probably more. The difference is, I have real qubits. You can buy my machines, you can use them.”
Stocks are rising on Monday as they did Friday afternoon following The U.S. Customs and Border Protection office of the Department of Commerceissuing a notice that certain electronic products such as smartphones and laptops will be exempted from the current U.S. tariff regime — at least for the moment.
Merrill Lynch chip analyst Vivek Arya writes that the announcement was a “net positive as it allows for debate/discussion on this critical end-market that contributes ~50% of all chip demand.”
But, gains by the Nasdaq and the S&P 500 have subsided as the day wore on amidst confusing signals.
Despite the fact that semiconductors were not included in The White House’s first round of tariffs, the negative views continue to pile up for chip makers.
As I mentioned Wednesday, many observers have been expecting the upcoming earnings season, which gets underway in earnest the week of April 21st, will reflect uncertainty about the ultimate impact of tariffs and recession threat.
Some are not waiting for that confusion. Citigroup’s Chris Danely writes Friday morning that the issue isn’t the earnings season, it’s what happens after. The chip makers will start to cut their expectations later in the current quarter, he writes, and in subsequent quarters.
“While we expect slightly below-consensus 2Q25 guides, we believe more significant cuts will come later in the quarter and the year as companies digest tariff impact,” writes Danely.
The euphoria that emerged Wednesday as The White House paused the harshest tariffs for ninety days has completely evaporated, not really a surprise, with stocks Thursday registering large declines.
Knowing that tariffs may well return to full strength in ninety days, the Street is starting to get more specific in looking at the implications for tech.
Morgan Stanley’s Joseph Moore, who follows Nvidia, does the math on what the tariff math will be on its products.
While semiconductor products are themselves immune from higher tariffs for the moment, there will be a tariff effect on the finished product into which these chips are assembled.
Obviously, the focus at the moment by the Street is on whether demand for artificial intelligence chips can hold up in the face of tariffs and their accompanying uncertainty. It’s a serious risk to the entire market.
At the same time, it’s worth keeping in mind trends that may be significant beyond the immediate economic threat. One positive development emerged for Broadcom on Wednesday.
Part of Broadcom’s very large chip business is getting paid by Alphabet’s Google to help the company bring to production Google’s custom “TPU” chip. Google is one of three custom-chip customers for Broadcom, the other two being Meta, and ByteDance, the Chinese owner of TikTok.
Wednesday is another one of those days: big surge for tech shares at the open, then a swoon, and maybe a little bit of recovery as the day wears on.
As for the business of tech, the Street continues to reduce its expectations following each new tariff development, the key one Wednesday being China’s responding to the U.S.’s hundred-and-four-percent tariff with an eighty-four percent tariff. JPMorgan CEO Jamie Dimon told Fox News in the morning that a recession is the “likely outcome” of the tariff battle, perhaps voicing what a lot of people are already assuming.
With two weeks to go to tech earnings season, TD Cowen’s semiconductor analyst Josh Buchalter warns that the uncertainty is likely to prompt very wishy-washy forecasts from companies.
When I checked the ticker-tape this morning, virtually, most stocks that I care about were in the green, following substantial gains Monday.
That ebullience reversed itself in due course, with most of tech now showing meaningful declines, such as a seven-percent drop in Advanced Micro Devices, a five-percent drop in Apple shares, and a two-point loss for Nvidia.
Perhaps this is the new normal (of the moment). What I called value-hunting in this week’s podcast apparently cannot overcome the tide of negative views on the fundamentals of tech, nor the continued uncertainty about where the U.S.’s tariff battle will land us.
The White House’s “Liberation Day” tariffs caused a massive rout in the market for the week ending April 4th, sending the Nasdaq Composite Index down ten percent and causing the Standard & Poor’s 500 Index to lose five trillion dollars in market cap in just two days of trading — the fifth-worst decline since World War II.
While some penny stocks rose, including obscure Chinese stocks such as Netclass Technology, we really saw a lot of perfectly respectable names getting clobbered, such as Cambium Networks, down 60% in one week.
Over the weekend, high-profile types such as hedgie Bill Ackmanurged U.S. President Donald Trump to consider a “pause” to tariffs in order to avoid economic “nuclear war.”
At the risk of being a pollyanna, I would note that today the TL20 group of stocks worth considering is outperforming a drop in the Nasdaq Composite and the Standard & Poor’s 500, with the TL20 up a point and the two indices down one percent and two percent, respectively.
The increase is coming from gains in several of the largest components, with Nvidia up three percent, Broadcom up four percent, AristaNetworks up over six percent, and Micron Technology up over five percent.
There’s no news, that I can see, for these names, and certainly the terrible trend in market outlook doesn’t suggest anything more happy for these names than the rest of the market.
A quick review of what happened during “Liberation Day” week as tariffs soared and stocks plunged.
Both the biggest gainers and decliners in U.S.-listed tech stocks last week were smaller names you probably never heard of, such as Ideanomics, down 75%, a twenty-one year old company based in New York involved in electric vehicle fleets and also financial services. It’s been a penny stock for a long time now, as there doesn’t seem to be much of a business left.
As I mentioned yesterday, this is a time when people start to make lists. They make lists because they think the next thing to happen after a massive sell-off like we saw on Thursday is to buy stocks.
And, in fact, it is generally true that the time when people are least inclined to buy stocks is precisely when people make the most money.
My list is not a list so much as a survey of how things have gotten cheaper or more pricey. Obviously, I think the things that have gotten cheaper are a better bet, but it’s not always a slam dunk.
Amidst the carnage on Thursday following U.S. President Donald Trump’s big tariff reveal on Wednesday, the first three casualties are Nvidia, Lyft, and the whole semiconductor complex.
Shares of Nvidia are down seven percent after HBSC’s Frank Lee cut his rating to Hold from Buy, and slashed his price target to $120 from $175, writing that the stock is not expensive, and the outlook is good, but “we now expect to see limited upside potential going forward given limited room for significant earnings upside surprise over the next 1-2 years and potential re-rating headwinds that we think are yet to be fully factored in by the market.”
Immediately following U.S. President Donald Trump’s announcement of global tariffs, the response has been swift in after-hours trading.
Futures on U.S. equities are down two to four percent as I write this, and just about everything is down sharply.
The table below shows those large names that have fallen the hardest. It also seems the market has decided which stocks it views as relative havens, and they’re having a less-bad evening.
While everyone is broadly trying to figure out what will happen with White House tariff actions on Wednesday, the Street is trying to find a way to handicap the companies it cares about.
There’s a great deal of uncertainty in the news coverage of what the White House has labeled as “Liberation Day” on April 2nd. The Washington Post’s Jeff Stein and David Lynch write that it’s unclear if the White House approach would levy a global tariff, or be more selective.
“One option would raise import duties on products from virtually every country, rejecting more targeted approaches that have been publicly outlined in recent days by some of Trump’s senior advisers,” they write, citing unnamed sources.
Monday, March 31st, as I record this, is another down day, following a two-percent decline in the Nasdaq Composite in the week ending March 28th.
All of this result of various news headlines that are not too encouraging, including the threat of further tariffs and the threat of sanctions on Russia by U.S. President Donald Trump.
Investors continue to be uncertain as well about the prospects for what is called the AI trade, including invidious GPU's and all the other technology in that ecosystem of making AI run.
The signature event for the weekend of the 28th was the initial public offering of CoreWeave, a Silicon Valley startup that rents capacity in GPUs. The offering had been priced at $47 to $55. It was downgraded subsequently to just $40 and the number of shares offered was downgraded.
Intel’s newly appointed CEO, Lip-Bu Tan, in the job just fourteen days, took the stage at the company’s event in Las Vegas for customers, Intel Vision, on Monday evening, to lay out in broad terms what he plans to do.
I think it was a very smart move for Tan, a venture capitalist, to end his talk with a pledge to stay at Intel “for as long as it takes.”
Tan at one time ran software maker Cadence Design Systems. He was brought in by the Cadence board to help out for just three months, but, as he told the audience, he ended up staying fifteen years.
It’s important, when you’re trying to fix a troubled company, to make clear you are not on a fly-by tour, you are committed. And he did that.
Monday has been all about slashing price targets on tons of companies as the looming threat of recession and inflation — stagflation — grips the market.
To cite just a few examples, analysts at Jefferies & Co., Truist Securities, and Wells Fargo were slashing prices across numerous stocks, including those the firms recommend, as the analysts come to grips with a market not willing to pay nearly so much.
I won’t put you through all of these cuts, but let me offer the top-level view from Jefferies’s software analyst Brent Thill.
Thill cuts targets across thirty-two covered stocks by as much as twenty-two percent, writing that he needs to “account for recent multiple compression,” given a drop in the benchmark software index, the iShares Expanded Tech-Software Sector ETF, the “IGV,” which is down over eleven percent this year.
The financial media are doing a lot of hand-wringing about the “Magnificent Seven” tech stocks, which can include any combination of Apple and other names that you happen to choose from among the top thirty or so global names. There’s been a lot of interviewing of fund managers for their opinion about Mega Tech, and there has been some good valuation work done, such as Bloomberg’s Jeran Wittenstein and Ryan Vlastelica’s report two weeks ago.
But a lot of the coverage of Mega Tech stocks is very general, to my mind, so, I thought I’d put some numbers to the matter.
“This is a real market, with a real opportunity. Best-in-class technology companies take advantage of these opportunities.”
We are now in the third month of a calendar quarter, past the rush of corporate earnings season, which is a relatively quiet time that companies often use to hold an “analyst day” event, when they make various promises to the brokerages that cover them.
Last week saw two rather successful such days, from Nvidia, on Tuesday, and Corning, on Monday.
This week, not as interesting.
Tuesday at the Nasdaq in New York, IT services giant Cognizant Technology Solutions was holding its gathering. The gathering comes as activist fund Mantle Ridge has taken a billion-dollar stake in the firm, arguing the stock is undervalued, according to The Wall Street Journal’s Lauren Thomas and Ben Glickman.