• Home
  • News
  • Personal Finance
    • Savings
    • Banking
    • Mortgage
    • Retirement
    • Taxes
    • Wealth
  • Make Money
  • Budgeting
  • Burrow
  • Investing
  • Credit Cards
  • Loans

Subscribe to Updates

Get the latest finance news and updates directly to your inbox.

Top News

I Burned Down My House — and Learned a Leadership Lesson I’ll Never Forget

July 14, 2025

How (Le) Poisson Rouge Went From Idea to Music Destination

July 14, 2025

Nvidia CEO: AI Will Change Everyone’s Jobs, Including My Own

July 14, 2025
Facebook Twitter Instagram
Trending
  • I Burned Down My House — and Learned a Leadership Lesson I’ll Never Forget
  • How (Le) Poisson Rouge Went From Idea to Music Destination
  • Nvidia CEO: AI Will Change Everyone’s Jobs, Including My Own
  • 13 Behaviors People Find Condescending
  • Charitable Planning After The Big Beautiful Bill (OBBBA) Is Different
  • Walmart’s Anti-Theft Crackdown: Honest Shoppers Lose Out
  • Is It Worth Your Time to Join a Class Action Lawsuit?
  • 7 Tech Habits That Are Quietly Costing You More Than You Think
Monday, July 14
Facebook Twitter Instagram
iSafeSpend
Subscribe For Alerts
  • Home
  • News
  • Personal Finance
    • Savings
    • Banking
    • Mortgage
    • Retirement
    • Taxes
    • Wealth
  • Make Money
  • Budgeting
  • Burrow
  • Investing
  • Credit Cards
  • Loans
iSafeSpend
Home » Search Giant Is Just Getting Started
Investing

Search Giant Is Just Getting Started

News RoomBy News RoomAugust 10, 20230 Views0
Facebook Twitter Pinterest LinkedIn WhatsApp Reddit Email Tumblr Telegram

Given the macro headwinds, not many investors expected the magnitude of the Nasdaq-100’s rally through the first six months of 2023. Going into this year, we were positioned for bottom-line focused investment themes that we felt would be able to deliver earnings growth due to secular demand for its products, and in some cases, be able to reduce costs to maintain profitability.

Big Tech versus Tech Sector earnings

Below is an analysis of consensus earnings estimates from Zack’s on Q2 Technology Sector earnings trends through July 26 plus expectations for the next three calendar quarters.

For the past three quarters, sales and earnings have declined on a year-over-year basis. However, there appears to be stabilization as year-over-year comps get easier and the market is estimating a modest resumption of growth in Q3 and an acceleration in Q4 to Q124.

Meanwhile, Zack’s looked at the earnings picture for the “Big 7 Tech Players” – Microsoft, Alphabet, Meta, Nvidia, Apple, Tesla and Amazon. The earnings profile for the Big 7 is estimated to be more robust compared to the overall technology sector.

In addition to a better earnings profile, Big Tech prices and valuations have benefited from other factors that investors are seeking

  • Focus on their AI capability and having the financial resources to make the required investments so that they make a positive contribution to future earnings
  • Company size (i.e. large cap) and the ability to manage margins in the face of macro headwinds by meaningfully reducing costs but not at the expense of critical high ROI investments
  • Credit quality – following Fitch Ratings’ downgrade of U.S. government debt to AA+. Big Tech Credit worthiness is on par if not greater than US debt. For example, Alphabet has the same AA+ rating.

Amongst the Big 7, we believe Alphabet stands out for several reasons:

Year of Execution – Alphabet

Beginning in mid-2022, IO Fund began to transition allocation toward larger cap tech stocks because we felt they are in a better position to navigate a macro downturn. Big Tech has levers at its disposal to manage its margins by rightsizing its cost base. Importantly, at the same time they have the financial strength to make the investments required to capitalize on the AI opportunity and take market share from its weaker competitors. The medium-term bull case is that once revenue begins to meaningfully reaccelerate helped by its AI offerings, the combination of optimizing its cost structure and efficiencies garnered from technology investments leads to expanding margins. This is similar to Meta and its “Year of Efficiency”.

At the moment we prefer Alphabet (GOOGL) over Meta (META). We see a similar story playing out for Alphabet and its “Year of Execution”. We believe it’s in an earlier stage than Meta in its self-help process and its core business areas are just now showing signs of stabilization. Alphabet’s margins are beginning to rebound and have now returned to the percentage they were at in Q1 2022. Meanwhile 1) Resilience in Search, 2) stabilization in YouTube Ads, 3) Market share and profitability gains in Cloud and 4) Growth in Other Google (i.e. YouTube subscription) make us optimistic that revenue will accelerate and there is upside to margins for the remainder of the year.

In the recent Q223 earnings call, management commented on the QoQ strength in margins: “A quick comment on the sequential improvement in operating margins in the second quarter. There are two factors to note. First, the benefit from an acceleration in search advertising revenue growth in the second quarter. Second, the vast majority of the charges related to our workforce reduction and optimization of our global office space were taken in Q1.”

Search moat is strong

For all the hoopla surrounding ChatGPT and the belief that it will provide MSFT an opportunity to take share from Alphabet’s core search business, it has yet to happen according to Search Engine. According to their analysis, Microsoft is losing market share. It peaked at 9.92% in October 2022 and is now at 7.14%. With its market position firmly entrenched, Alphabet has the audience to roll out its Search Generative Experience (SGE). On its own, the Search business has proved resilient because it provides advertisers an attractive ROI on their ad spend. Looking ahead, SGE will improve advertisers’ ROI and will likely provide Alphabet additional pricing power. This will also improve their retail vertical. Meanwhile, consumer interest will further strengthen Alphabet’s dominant market position in Search.

However, let’s not forget about anti-trust trial

One of the reason we’re very positive on the AI potential for Google’s businesses is that it is sitting on the world’s very best consumer data, which is not an exaggeration in the least bit. Its ability to lead in artificial intelligence and large language models should not be underestimated.

Therein lies the issue. Google undisputedly has the world’s best consumer data, but did this grow to become part and parcel with operating a monopoly? The Department of Justice has asserted anti-trust violations against Google with the trial beginning in September 2023.

We anticipate two outcomes. The antitrust outcome will be mild, and Google will be empowered to continue to dominate. Or, the outcome will require the ad properties to be broken up, leading to a weaker stance for Google. This could benefit smaller ad-tech players, which we have identified and are monitoring closely.

The I/O Fund has been beating the drum about AI for 5 years. Now that it is here, we are targeting choice mid-cap to mega-cap names in the coming pullback. Once this exuberance runs its course, and the market gives up on AI, we will be buying the dip for this once-in-a-lifetime tech trend that is just starting. Join us the week following the holiday, Thursday, 8/17, at 4:30 EST where we will go over the specific AI stocks we are targeting. We will provide the macro backdrop, along with entry prices.

The I/O Fund Analyst Team contributed to this analysis

Please note: The I/O Fund conducts research and draws conclusions for the company’s portfolio. We then share that information with our readers and offer real-time trade notifications. This is not a guarantee of a stock’s performance and it is not financial advice. Please consult your personal financial advisor before buying any stock in the companies mentioned in this analysis. Beth Kindig and the I/O Fund own shares in GOOGL at the time of writing and may own stocks pictured in the charts.

If you would like notifications when my new articles are published, please hit the button below to “Follow” me.



Read the full article here

Share. Facebook Twitter Pinterest LinkedIn Tumblr Email

Related Articles

How (Le) Poisson Rouge Went From Idea to Music Destination

Investing July 14, 2025

Why This Market Dip Is Your Chance to Accelerate Product Velocity, Win Customers and Own the Next Cycle

Investing July 13, 2025

How Mastering Your Nervous System Boosts Leadership Presence and Performance

Investing July 12, 2025

Nvidia CEO Jensen Huang Now as Wealthy as Warren Buffett

Investing July 11, 2025

The Best Domains Are Gone — Here’s How Savvy Founders Still Snag Them

Investing July 10, 2025

How to Deal With Slow-Paying Customers the Right Way

Investing July 9, 2025
Add A Comment

Leave A Reply Cancel Reply

Demo
Top News

How (Le) Poisson Rouge Went From Idea to Music Destination

July 14, 20250 Views

Nvidia CEO: AI Will Change Everyone’s Jobs, Including My Own

July 14, 20250 Views

13 Behaviors People Find Condescending

July 14, 20250 Views

Charitable Planning After The Big Beautiful Bill (OBBBA) Is Different

July 14, 20250 Views
Don't Miss

Walmart’s Anti-Theft Crackdown: Honest Shoppers Lose Out

By News RoomJuly 14, 2025

The Toidi / Shutterstock.comImagine rushing through Walmart to grab a pair of socks before your…

Is It Worth Your Time to Join a Class Action Lawsuit?

July 14, 2025

7 Tech Habits That Are Quietly Costing You More Than You Think

July 14, 2025

Why Waiting for Monthly Financial Reports Is Creating Blind Spots and Slowing Your Growth

July 13, 2025
About Us

Your number 1 source for the latest finance, making money, saving money and budgeting. follow us now to get the news that matters to you.

We're accepting new partnerships right now.

Email Us: support@isafespend.com

Our Picks

I Burned Down My House — and Learned a Leadership Lesson I’ll Never Forget

July 14, 2025

How (Le) Poisson Rouge Went From Idea to Music Destination

July 14, 2025

Nvidia CEO: AI Will Change Everyone’s Jobs, Including My Own

July 14, 2025
Most Popular

What’s Your Retirement Forecast? Heat, Hurricanes And Wildfires Ahead

July 13, 20251 Views

Verizon’s Push to Keep Phones Locked Could Cost You

July 13, 20251 Views

Fed Fight Heats up: What Trump’s Choice Could Mean for You

July 13, 20251 Views
Facebook Twitter Instagram Pinterest Dribbble
  • Privacy Policy
  • Terms of use
  • Press Release
  • Advertise
  • Contact
© 2025 iSafeSpend. All Rights Reserved.

Type above and press Enter to search. Press Esc to cancel.