Big Tech roundup: Tesla, Nvidia, Apple and more

Episode Summary

Executive Summary: Unhedged reviews the mid-year performance of three-stock portfolios selected from the Magnificent Seven. Rob leads Elaine by 1.8 percentage points, with Microsoft, Amazon and Meta ahead overall of Elaine’s Nvidia, Google and Apple picks. The discussion weighs AI demand against valuation and competition, cloud growth, regulatory risks, and Tesla’s volatility, before briefly recommending the 1960 film The Magnificent Seven and praising Chicago.

Main Topics: Portfolio results and the Magnificent Seven: Rob’s Microsoft, Amazon and Meta picks average 8.6%, ahead of Elaine’s Nvidia, Google and Apple portfolio at 6.8%, a 1.8-percentage-point lead. The hosts stress that the result could change before year-end. Nvidia’s AI lead, valuation and competition: Nvidia’s strong earnings and AI-chip position support the stock, but expectations and valuation are high, performance has recently stalled, and China sales face uncertainty. Longer term, major cloud platforms could develop cheaper in-house chips. Cloud growth and Google’s performance: Google Cloud grew 22% but slowed from its prior pace, prompting a share-price reaction despite solid results elsewhere, including advertising. Microsoft’s cloud growth was 24% and accelerating, illustrating how investors may reward momentum as well as growth. Apple’s resilience amid headwinds: Apple faces regulatory scrutiny and China-related manufacturing and sales concerns, while lacking a major new product catalyst. The hosts nevertheless emphasize its profitability, cash generation, brand, ecosystem and history of innovation. Amazon and Meta: growth, execution and governance: Amazon’s retail and cloud businesses are performing adequately, while its rapidly growing advertising business faces an FTC challenge. Meta has rebounded after cost-cutting and a clearer AI strategy, but the hosts worry that renewed spending or an unfocused CEO could undo progress. Tesla’s volatility and valuation: The hosts avoided Tesla, whose shares fell sharply over the recent period despite strong year-to-date gains. They cite intensifying EV competition and price cuts, and question whether possible future businesses such as robotaxis justify the valuation. Long Short: a film and a city: Rob goes long the 1960 film The Magnificent Seven, while Elaine praises Chicago as lively and comparatively affordable. This closing segment contrasts with the investment-focused main discussion.

Key Arguments: Strong results do not automatically mean a stock will rise: Nvidia beat already-high expectations, yet its shares did not immediately advance, leaving valuation and the ability to deliver another growth phase central questions. Nvidia’s long-term competitive risk may come not only from rival chipmakers but from its largest customers—cloud platforms that could build cheaper, purpose-specific chips for AI services. Google’s 22% cloud growth and resilient advertising business were considered solid, but investors focused on deceleration and the absence of a convincing AI-and-cloud narrative. Apple’s near-term problems do not erase its structural strengths: a powerful brand, ecosystem, cash generation, profitability and a record of innovation make it a potentially resilient large-cap holding. Amazon’s advertising business is both a major growth engine and a regulatory vulnerability: the FTC alleges anti-competitive conduct connected to Amazon’s control of its marketplace. Meta’s recovery reflects cost-cutting and a more coherent AI strategy after expensive metaverse ambitions hurt investor confidence; continued discipline matters because a CEO’s discretionary spending can destroy value. Tesla’s competition-driven price cuts and weaker quarterly figures support the longstanding skeptical case. Potential businesses such as batteries, software and robotaxis may add value, but the hosts argue that optimistic assumptions still may not support the current share price.

Data Points: Nvidia share-price change since July recording: +11.5% - Best-performing stock among the six portfolio picks discussed; Elaine selected it. Google share-price change since July recording: +11.2% - Elaine pick; the discussion highlighted Google Cloud growth and deceleration. Apple share-price change since July recording: -2.3% (also described later as -2.2%) - Elaine pick and the weakest-performing stock among the six picks. Amazon share-price change since July recording: +9.4% - Rob pick; the hosts discussed retail, AWS and advertising. Microsoft share-price change since July recording: +9.3% - Rob pick; its cloud division was reported to have 24% year-over-year growth. Meta share-price change since July recording: +7.2% - Rob pick; the hosts attributed the recovery to efficiency measures and a clearer AI strategy. Elaine portfolio average return: 6.8% - Average for Nvidia, Apple and Google over the period reviewed. Rob portfolio average return: 8.6% - Average for Microsoft, Amazon and Meta; 1.8 percentage points ahead of Elaine. Google Cloud growth: 22% - Growth was strong but slower than in recent years, which contributed to investor disappointment. Microsoft cloud division growth: 24% year over year - Reported as accelerating from the prior quarter, despite being broadly comparable to Google’s growth rate. Amazon advertising business: About $12 billion per quarter; growing roughly 25–26% - The hosts called it a large, fast-growing business that is at the center of the FTC’s case. Amazon online retail growth: Mid-to-high single digits - Rob described the retail business as continuing to grow steadily. Meta share price at cited historical points: $336 on December 1, 2021; $93 on October 1, 2022; about $330 at the time of the discussion - Used to illustrate the decline during the metaverse push and subsequent recovery. Tesla recent-period share-price change: -17.4% - Tesla was not selected by either portfolio manager. Tesla year-to-date share-price change: About +100% - The hosts noted that the large year-to-date gain coexisted with a substantial recent decline. Tesla valuation estimate discussed: $185 per share versus a then-current price of $225 - A valuation exercise by Aswath Damodaran was described as finding that even optimistic assumptions for businesses such as robotaxis struggled to justify a higher value. Microsoft potential back-tax bill: About $20 billion - Raised as one of several possible large financial commitments or liabilities facing Microsoft. Microsoft Activision Blizzard deal: $75 billion - Rob cited the deal as a substantial spending commitment.

Pivotal Quotes: "Artificial intelligence consumes an incredible amount of computer power, and they are going to want to build very cost-efficient ways to deliver that product to users." — Rob Armstrong: His explanation of why cloud platforms could eventually challenge Nvidia with in-house AI chips. "The stock chart tells the tale." — Rob Armstrong: Introducing Meta’s dramatic decline during its metaverse push and recovery after cost-cutting and a renewed focus. "Tesla makes a very good product that other very large, very capable companies are also going to try to make." — Rob Armstrong: A concise statement of the skeptical investment case against Tesla as electric-vehicle competition grows.

Implications: The discussion underscores that AI enthusiasm alone is not enough to drive returns: expectations, valuation, competitive threats and regulation matter. Investors should distinguish durable business strengths from near-term catalysts, and treat concentrated, volatile mega-cap portfolios with caution.