The tech-heavy Nasdaq got a fresh jolt of optimism last week as six of the Magnificent Seven—excluding Nvidia—delivered solid quarterly earnings. While the numbers reaffirmed Big Tech’s dominance, the market response was far from uniform. As investors parse the data and debate whether to ride the AI wave or book profits, the question is clear: Is now the time to double down, or is it wiser to sell in May and step away?
Strong Earnings, Divergent Reactions
The “Magnificent Seven” tech giants largely delivered stellar results this earnings season, reinforcing their dominance in both market cap and investor attention.
Alphabet rose 4% after beating both revenue and EPS estimates.
Alphabet (GOOG)
Microsoft jumped 10% following a strong earnings beat.
Microsoft (MSFT)
Meta also impressed, with robust ad revenue that helped ease investor concerns over potential global trade headwinds.
Meta Platforms, Inc. (META)
Even Amazon and Apple, which saw stock declines due to softer-than-expected guidance, still beat on actual earnings. These results helped anchor sentiment across the market, signaling that Big Tech's foundational strength is still intact.
Amazon.com (AMZN)
Apple (AAPL)
Collectively, however, the group helped stabilize broader market sentiment after a jittery April, where concerns about sticky inflation and “higher for longer” interest rates had weighed heavily on growth stocks.
Valuations Still a Concern
Despite the solid numbers, I remain on the sidelines. Personally, I don’t own tech stocks at these levels, nor do I plan to initiate new positions anytime soon. My hesitation stems not from the strength of the businesses—they’re industry leaders for a reason—but from the valuation premiums that are hard to justify based on fundamentals alone.
Many of these stocks are trading at lofty forward price-to-earnings (P/E) ratios, with expectations of continued double-digit growth already priced in. Even more concerning is how far many of these companies have drifted from their 52-week lows, reducing the margin of safety for new investors. Buying now feels like chasing momentum rather than capitalizing on opportunity.
Not Just About One Quarter
It’s tempting to react to strong earnings by jumping in, but investing based solely on one earnings season can be shortsighted. While quarterly results provide useful data points, long-term investors need to consider broader macro risks, industry trends, and valuation metrics.
This is particularly important in 2025, where we face:
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Persistent inflation, keeping interest rates elevated longer than previously expected.
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Geopolitical risk, especially rising U.S.-China tensions, which could impact global supply chains and technology exports.
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Regulatory overhang, as antitrust and data privacy scrutiny intensifies in both the U.S. and Europe.
These are not one-off risks—they are structural. And they have the potential to weigh on margins and ultimately valuations.
AI: Real Adoption, but Still Uneven Monetization
AI is no longer just hype — it's already transforming operations, product offerings, and customer experiences across Big Tech. Microsoft is monetizing Copilot through Microsoft 365 subscriptions and enterprise upsells. Meta is using AI to optimize ad delivery and reduce content moderation costs. Nvidia is selling the picks and shovels of the AI boom, with its chips powering data centers around the world.
That said, while adoption is real, the monetization impact is still uneven across the sector. For some companies, AI is driving measurable revenue gains today. For others, it's a long-term investment in infrastructure, talent, and R&D that has yet to significantly move the bottom line.
More importantly, the market has already priced in a tremendous amount of AI-driven growth. This creates a challenge: even when companies post solid AI-related gains, the expectations are so high that any perceived shortfall can trigger sharp sell-offs.
So while AI is no longer just a narrative, the risk today isn’t that it won’t be real — it’s that the valuation premiums assume a pace and scale of impact that may take longer to materialize. As with any transformative technology, adoption may be exponential, but profitability can lag.
Final Thoughts: Caution, Not Capitulation
To be clear, I’m not bearish on tech as a sector. The underlying fundamentals are strong, and these companies are among the best-managed in the world. But investing is about risk-adjusted returns, not just quality.
For those with a long time horizon and a high tolerance for volatility, staying invested or dollar-cost averaging into weakness can make sense. But for those of us who prefer a better margin of safety, now doesn’t feel like the right time to chase.
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