Alphabet earnings and analysis, why one strategist is underweight the Mag 7

Market Overview - The stock market closed mixed, with the Dow up 0.5% (259 points), while the NASDAQ fell 1.5% [1][2] - The S&P 500 was down about 0.5%, but the equal-weighted S&P 500 index closed up nearly 1% at a record high [2][3] - Small-cap indices showed varied performance, with the Russell 2000 down 0.7% and the S&P 600 up 0.9% [3] Sector Performance - The Dow Jones transports surged over 2% for three consecutive days, totaling an 8% increase, a trend not seen since May 2025 [4] - The materials sector led gains, with gold and silver trades up over 2%, followed by energy, which also rose by 2% [5] - The technology sector was the biggest loser, down 2.82%, with significant declines in major tech stocks like AMD (down 17%) and Palantir (down 11%) [5][6] Alphabet's Q4 Earnings - Alphabet reported Q4 operating income of $35.93 billion, slightly below the expected $36.95 billion, with total revenue of $113.83 billion, exceeding the estimate of $111.4 billion [9][10] - Google Cloud revenue was reported at $17.66 billion, surpassing the estimate of $16.2 billion, indicating strong performance in that segment [10][24] - The company projected 2026 capital expenditures between $175 billion and $185 billion, significantly higher than the consensus estimate of $120 billion, leading to a drop in stock price by about 6% in after-hours trading [11][12] Qualcomm's Q1 Results - Qualcomm reported Q1 EPS of $3.50, exceeding estimates of $3.41, with revenue of $12.3 billion, also better than the expected $12.2 billion [34][35] - The outlook for Q2 revenue is projected between $10.2 billion and $11 billion, below the previous estimate of $11.18 billion, due to headwinds from memory shortages in the smartphone market [36][40] - Qualcomm is diversifying its business beyond smartphones, focusing on markets like PC chips and robotics [37][38] Investment Strategies - A neutral stance on equities is maintained, with an underweight position in U.S. stocks compared to international markets, driven by attractive valuations overseas [43][45] - The current market environment shows targeted selling primarily in technology, with a focus on quality investments outside the tech sector [47][48] - Concerns about future earnings growth and valuation in the tech sector, particularly among the Magnificent Seven, are leading to a cautious investment approach [53][56]