Well folks, I have to be honest with you. I did not have a little-known Chinese AI startup throwing the tech world into a tizzy on my bingo card this week.
As I wrote about on Tuesday, news broke over the weekend that a little-known Chinese startup called DeepSeek had a new large language AI model that could outperform the likes of OpenAI’s ChatGPT – and with far fewer resources.
As a result, all hell broke loose in the market on Monday, with many AI-related stocks tumbling by 20% or more. NVIDIA Corporation (NVDA), for its part, lost 17% before recovering some of those losses later in the week.
Clearly, this is not how things were supposed to go.
The playbook seemed clear… Earnings season was supposed to hog the limelight this week as the fourth-quarter earnings announcements kicked into high gear. Four out of the seven of the Magnificent Seven Big Tech names were slated to report: Meta Platforms (META), Microsoft Corporation (MSFT) and Tesla, Inc. (TSLA) on Wednesday, while Apple Inc. (AAPL) reported yesterday after close.
We will get a look at Alphabet and Amazon’s latest numbers next week. And then, as usual, NVIDIA will round things out towards the end of the earnings season.
So, in today’s Market 360, I want to bring these reports back into the spotlight. We will review the results from Meta, Microsoft and Apple, including what they had to say about the DeepSeek news. We’ll also talk more in depth about the ramifications of Trump 2.0 and how you can set yourself up to profit.
Let’s dig in…
Meta Platforms Inc.
Meta Platforms announced its fourth-quarter revenue increased 20.6% year-over-year to $48.38 billion and also beat Wall Street consensus estimates for revenue of $46.99 billion.
Meanwhile, earnings per share surged 50.5% year-over-year to $8.02 per share, up from earnings of $5.33 per share in the same quarter of last year. Analysts were calling for earnings of $6.74 per share.
Now, Meta’s Reality Labs sales rose slightly to $1.1 billion in the fourth quarter, but the virtual reality unit recorded nearly $5 billion in losses. Founder and CEO Mark Zuckerberg noted that “this is also going to be a pivotal year for the Metaverse” before adding that this would be the year when a number of the long-term investments for their Metaverse efforts will really start to pay off.
Then, during its earnings call, Zuckerberg addressed the DeepSeek news:
I think there’s a number of novel things that they did that I think we’re still digesting. And there are a number of things that they have advances that we will hope to implement in our systems.
He added:
…it’s probably too early to really have a strong opinion on what this means for the trajectory around infrastructure and capex and things like that.
This comes less than a week after Meta said it plans to spend between $60 billion and $65 billion on AI infrastructure this year. So, given the fact that there were no apparent alarm bells over the DeepSeek news in the earnings call, Wall Street cheered the positive results and shares of META rallied more than 4% on Thursday.
Looking ahead, Meta Platforms anticipates revenue between $39.5 billion and $41.8 billion in the first quarter of 2024. Analysts were calling for revenue of $41.6 billion.
Microsoft Corporation
Microsoft reported second-quarter earnings of $3.23 per share, up 10.2% year-over-year from earnings of $2.93 per share and beating analysts’ estimates of $3.12 per share. Revenue of $69.6 billion was up 12.3% from $62.0 billion a year ago as bested analysts’ estimates of $68.81 billion.
I should note, though, that this is the slowest growth since mid-2023.
But what really displeased Wall Street was Microsoft’s Cloud segment. There, revenue rose 21% to $40 billion but missed expectations for $41.1 billion. Digging a little deeper, the company’s artificial intelligence spending seems to have weighed on margins, as the cloud unit margins decreased to 70%.
Wall Street wasn’t happy with those results, and the stock fell by roughly 6% on Thursday.
Similar to Meta, Microsoft took some time to address DeepSeek. CEO Satya Nadella said regarding DeepSeek’s reported AI advancements:
That type of optimization means AI will be much more ubiquitous. And so, therefore, for a hyperscaler like us, a PC platform provider like us, this is all good news as far as I’m concerned.
In fact, Microsoft began offering DeepSeek’s R1 model on Azure on Wednesday and noted that it will soon be available to run on Copilot+ PCs as well as the GPUs available on Windows.
Apple Inc.
Apple’s earnings results for its first quarter in fiscal year 2025 came in at $2.40 per share, which was 2.13% above analysts’ estimates for earnings of $2.35 per share. Quarterly revenue of $124.3 billion was up 4% year-over-year and just above analysts’ expectations of $124.1 billion.
Now, iPhone sales declined about 1% to $69.1 billion and missed Wall Street’s estimates of $71 billion. This news came after the stock was hit with a couple of high-profile downgrades by Wall Street analysts in recent days.
I should also note that China sales continue to be a struggle for the company. However, revenue for Apple’s Services business continues to soar, rising 14% year-over-year to $26.3 billion – in line with analysts’ expectations.
This report was a bit of a mixed-bag for Apple, so it isn’t surprising that the stock finished close to flat on Friday in the wake of this news.
Now, CEO Tim Cook did address the elephant in the room (DeepSeek) by saying he believes “innovation that drives efficiency is a good thing,” before proceeding to say that Apple’s integration of silicon and software will continue to serve the company well.
What Stock Grader Says…
Now, money always flows to companies best positioned to profit and thrive in the current environment. And investors who stay focused on fundamentals – like accelerating earnings and sales growth – and don’t get distracted or react to every headline, will prosper.
That much is clear during earnings season.
When it comes to fundamentals, I’ve relied on my tool that I have perfected over the past four years: Stock Grader (subscription required). It has helped me identify market-beating picks for the last 47 years of my career.
So, with that said, let’s take a quick look at the Stock Grades for each of these companies:
As you can see, of the three, the only stock with a “buy” rating is Meta, with a “B” Total Grade. Apple earns a “C,” which is a “hold” – while Microsoft earns a “sell” due to its “D” Total Grade.
In other words, Stock Grader is telling us that Meta is worth considering, while investors should be cautious about Apple – and to stay away from Microsoft right now.
Positioning to Prosper
Meanwhile, I should add that the last time Trump was President, my system gave a buy rating to all of the top 30 performing stocks of Trump’s first term. And I’ve identified a handful of picks that I expect to prosper during this 100-Day Melt-Up…
The fact is, we’ve already seen Trump sign a series of executive orders related to energy, manufacturing and artificial intelligence that could have profound effect on certain stocks. And things are just getting started…
Go here for all the details on how to profit from The 100-Day Trump Melt-Up now.
Sincerely,
Louis Navellier
Editor, Market 360
The Editor hereby discloses that as of the date of this email, the Editor, directly or indirectly, owns the following securities that are the subject of the commentary, analysis, opinions, advice, or recommendations in, or which are otherwise mentioned in, the essay set forth below:
NVIDIA Corporation (NVDA)
