Doran: Alphabet could be a tailwind for the AI trade, which is just getting more powerful

Cloud & AI - Alphabet's cloud business experienced 32% year-over-year growth, considered a positive sign given its position as third after Microsoft and Amazon [1][2] - The AI trade is seen as a sustainable tailwind, driven by the increasing demand for computing power evidenced by the growth in ChatGPT usage, from 200 million in August to doubling in six months and then again in two months [2][3] - AI-focused stocks like Nvidia, Broadcom, Meta, and Microsoft are sector picks, but caution is advised due to their proximity to all-time highs and headline risk [9] Trade & Tariffs - The market views President Trump's tariffs as negotiating tactics, with expectations that tariffs will settle around 15-16% [5][6] - This is higher than the 2-225% at the beginning of the year [6][7] Market Caution & Valuation - Professional investors are advised to be cautious as the market approaches all-time highs, with valuations at 225 to 23 times earnings [7] - Meme stock action is considered a sign of a frothy market, indicating potential risk [8] - Taking profits off the table in big winners like Nvidia or Broadcom is recommended as a risk management strategy [13] Individual Stock Performance - IBM's stock moved back due to weaker-than-expected software performance, despite an overall good report [10] - Netflix traded lower despite better-than-expected top and bottom-line results and raised guidance, due to a reset in valuation [10][11] - Alphabet is considered interesting with a PE of 20, incorporating a lot of the risk [11]