My No. 1 Indicator Amid Red-Hot Tech Earnings

Here's what to look for during quarterly calls… Published By Money & Markets, LLC. May 02, 2024 Published By Money & Markets, LLC. May 02, 2024 [Turn Your Images On] [Turn Your Images On] From The Desk of [Matt Clark, CMSA®]( Chief Research Analyst, [Money & Markets Daily]( My No. 1 Indicator Amid Red-Hot Tech Earnings Money & Markets Daily, Companies are crushing expectations at an impressive clip in the first half of this busy earnings season. Eight of the 11 S&P 500 sectors have reported year-over-year earnings growth. The estimated earnings growth rate for this quarter is 3.5% — more than double U.S. GDP (1.6%) for the quarter! If things hold, it will mark the third straight quarter of year-over-year earnings growth. But these reports tell us much more than just what a company is earning. Taking a deeper dive, specifically into tech earnings, shows me that profits are on the rise and investment in AI is the reason. I also found an indicator that tells me we are on the verge of an explosion in AI demand. Let me show you… Tech Net Profits Moving Higher It’s easy to see what a company earns and how it earned it, but I like to look deeper at the balance sheet. For one, I want to see a company’s net profit margin. This shows how much of each dollar a company collects as revenue translates into profit. More profit means more cash to spend on research and expansion. And certain sectors are raking in profits at an impressive clip. [Turn Your Images On] [(Click here to view larger image.)]( Real estate leads the pack, which makes a ton of sense, considering how much prices have ballooned alongside interest rates. But I want to focus on the second bar from the left in the chart above… Information technology net profit margins grew from 22.4% in the first quarter last year to 25.5% in 2024. But why? For one, Big Tech companies like Google, Amazon, Apple and Cisco have slashed staff in an effort to control operating and overhead costs. It worked as Google’s net profit margin jumped from 21.6% in March 2023 to 29.4% in March 2024. Likewise, net profit margins at Amazon, Apple and Cisco all jumped three percentage points or more, year over year. Most recently, Amazon [posted a 13% increase]( in its Q1 2024 revenue. Profits also surged to $10.4 billion thanks to growth in its cloud computing unit. These higher net profit margins give Big Tech companies more flexibility to invest in new technology, more personnel or mergers and acquisitions, as I've touched on [recently](. But one indicator shows just where Big Tech is spending its excess cash… --------------------------------------------------------------- [Turn Your Images On]( [“Titan of Tech” Bets Big on Tiny AI Company]( He’s made as much as 3,250,000% in just three years on companies like Facebook, Airbnb, and PayPal… But our research shows his latest investment could be his most successful venture yet. [See how you can invest alongside him]( (with a starting stake of just $25). But you’ll want to do it between now and May 5. --------------------------------------------------------------- Tech Spending Focuses on 3 Areas The S&P Global Market Intelligence U.S. Technology Demand Indicator is a survey to show companies’ intent to spend on technology. It recently hit a mark not seen in two years: [Turn Your Images On] [(Click here to view larger image.)]( The indicator reached 52.1 … a 12% jump from the same time a year ago and the highest reading since the first quarter of 2022. Tech spending is on the rise. What’s more important is what companies are planning to spend their money on: [Turn Your Images On] [(Click here to view larger image.)]( The increase in tech spending can be attributed to three things: artificial intelligence (AI), cloud infrastructure and information security (the last two are related to the first). And it points to a couple of points worth internalizing as the AI mega trend develops: - Big Tech revenues will continue to climb as companies across all 11 S&P 500 sectors pump more money into AI and its related technologies. - It illuminates just how big the AI sector is now … and will be in the future. The global generative AI market was worth $44.9 billion last year and is projected to reach $207 billion by 2030. This increase in AI spending is already showing in tech stocks. Back in April, I showed you that more than half of the top-performing tech stocks [so far this year are tied to AI](. As I mentioned then, I firmly believe the AI mega trend is going to keep growing … and share prices along with it. Until next time… Safe trading, [Matt Clark, CMSA®]( Chief Research Analyst, [Money & Markets Daily]( --------------------------------------------------------------- [Turn Your Images On] Are We Still in a Bull Market? Analysts often try to make market analysis difficult. They use advanced math to unlock deep mysteries, or they present countless facts to argue their point. They forget that sometimes analysis can be simple. The chart below is a simple look at whether we're in a bull market or not. The black line shows the percentage of stocks in the S&P 500 Index above their 200-day moving average (MA). This average is used to define the direction of the trend. When it's above 50%, most stocks are in uptrends. Right now, about 74% of the stocks in the index are trading above their 200-day MA. And the percentage is rising, which means most stocks are in uptrends, and more are joining them. Bottom line: This is a bull market. — Mike Carr, Chief Market Technician, Money & Markets [Turn Your Images On] [(Click here to view larger image.)]( --------------------------------------------------------------- Check Out More From Money & Markets Daily: - [ZUCK’S WORDS CRASHED META 19% — AND CREATED SAFE INCOME]( - [3 THINGS YOU SHOULD KNOW ABOUT ELON’S “BIG NEWS”]( - [WHERE'S YOUR "RETIREMENT CONFIDENCE" IN 2024?]( --------------------------------------------------------------- [Turn Your Images On]( Privacy Policy The Money & Markets, P.O. Box 8378, Delray Beach, FL 33482. To ensure that you receive future issues of Money & Markets, please add info@mb.moneyandmarkets.com to your address book or [whitelist]( within your spam settings. For customer service questions or issues, please contact us for assistance. 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Our track record is based on hypothetical results and may not reflect the same results as actual trades. Likewise, past performance is no guarantee of future returns. Certain investments carry large potential rewards but also large potential risk. Don't trade in these markets with money you can't afford to lose. Money & Markets permits editors of a publication to recommend a security to subscribers that they own themselves. However, in no circumstance may an editor sell a security before our subscribers have a fair opportunity to exit. Any exit after a buy recommendation is made and prior to issuing a sell notification is forbidden. The length of time an editor must wait after subscribers have been advised to exit a play depends on the type of publication. (c) 2024 Money & Markets, LLC. All Rights Reserved. Protected by copyright laws of the United States and treaties. This Newsletter may only be used pursuant to the subscription agreement. 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