Three Factors Drive Growth In MATANA Stocks
1. AI Powers Valuation Growth, But Earnings Growth Keeps Momentum Going
On October 13, 2022, the NASDAQ was trading at 10,440.64, the 52 week low. The market was still awaiting a recession and growth stocks were out of favor. The digtal giants were being rotated out for value stocks and many thought that big tech was dead. With valuations down, migrations out of Silicon Valley tech centers up, and a malaise over big tech, the future was gloomy.
Yet, November 30th, 2022 would forever be remembered as the date that changed everything. Chat GPT by OpenAI was publicly released and the AI explosion began as 100M users joined 30 days later. Every tech vendor worth their salt regrouped and pivoted to showcase their AI offerings.
In the latest quarterly earnings, AI was front and center of all the earnings calls. In fact, CEO's Sundar Pichai of Alphabet/Google said it 66 times, Satya Nadella of Microsoft said it 47 times, and Mark Zuckerberg of Meta said it 42 times.
2. Ads Are Back For The Remaining Digital Giants
Alphabet and Meta benefited from being the digital giants left standing. Alphabet had a 5% YoY growth in Google Search and 4% growth on YouTube. Meanwhile, Meta’s revenues jumped 11%. Reels is picking up and generated $10B for the past 12 months. Moreover,Apple and Amazon benefit from Ads as Amazon is the third biggest player in digital ads. While Apple doesn’t disclose revenues, they are one of the top 10 players in this space.
3. Cloudy Times Ahead (For Now)
Microsoft shows a drop in cloud growth from 51% to 26%, While the AI story is being used to boost revenues, Microsoft also needs more compute power and to upgrade its aging data centers to keep up Customers have complained about growing issues with Teams and Office 365.
Google Cloud was flat at 28% but finally profitable which is a big accomplishment for the third place player. However, this is the key area for growth for Google and it appears that Alphabet intends to double down in Google Cloud despite the focus on profitability.
Investors await results form Amazon on August 3rd. All eyes are on two factors - cost cutting and AWS growth. So far, AWS hasn't put a strong AI story as they targeted develoeprs instead of the C-suite. However, their beefed up partner program may prove to be the lever that continues their growth.
The Bottom Line: MATANA Stocks Continue To Outperform
Microsoft, Apple, Tesla, Alphabet, Nvidia, and Amazon continue to lead the market cap rankings (see Figure 1). These digital giants have shown how building the largest networks, disintermediating customer account control, competing for data, winning on digital monetization, and infusing a long term mindset are the secrets to dominating markets.
Figure 1. Market Cap Leaders are MATANA stocks
What other digital giants do you see as winners in the market? Where do the lessons of digital giants play out in the war for AI?
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