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Why Investors Have Soured on Restaurant Stocks
In this podcast, Motley Fool contributors Travis Hoium, Lou Whiteman, and Rachel Warren discuss: Cava's big earnings drop. Why Chipotle has struggled. Restaurants as an economic warning. One restaurant tech stock that's still growing. To catch full episodes of all The Motley Fool's free podcasts, check out our podcast center. When you're ready to invest, check out this top 10 list of stocks to buy. A full transcript is below. Should you invest $1,000 in Chipotle Mexican Grill right now? Before you buy stock in Chipotle Mexican Grill, consider this: The Motley Fool Stock Advisor analyst team just identified what they believe are the for investors to buy now… and Chipotle Mexican Grill wasn't one of them. The 10 stocks that made the cut could produce monster returns in the coming years. Consider when Netflix made this list on December 17, 2004... if you invested $1,000 at the time of our recommendation, you'd have $671,466!* Or when Nvidia made this list on April 15, 2005... if you invested $1,000 at the time of our recommendation, you'd have $1,115,633!* Now, it's worth noting Stock Advisor's total average return is 1,076% — a market-crushing outperformance compared to 184% for the S&P 500. Don't miss out on the latest top 10 list, available when you join Stock Advisor. See the 10 stocks » *Stock Advisor returns as of August 18, 2025 This podcast was recorded on August 13, 2025. Travis Hoium: Why have restaurant stocks gone south in 2025? Motley Fool money starts now. Restaurant stocks like Chipotle, Darden and Starbucks have been some of the biggest winners for investors over decades, but are consumer tastes changing? I'm joined by Lou Whiteman and Rachel Warren to try to answer that question. Let's get to the news of the day, and that's Cava. There's been some really strange trends in a lot of the restaurant industry over the past few months, companies that were growing like crazy, suddenly reporting negative numbers. Cava reported after the market closed yesterday, as we're recording, and the stock is down 23% early in trading. Lou, what did we learn from Cava, and why is this such a huge reaction from investors? Lou Whiteman: From the headline numbers were fine. But if you dig a little deeper, the traffic was flat, margins are down. They did warn of comp sales guidance. Comp sales are because these restaurant chains are growing so fast, you want to compare apples to apples. How many stores did you have last year? How many stores you have this year? Obviously, just getting more throughput through those stores. This is such a scale business that's so important. They lowered their comp sale guidance by 200 basis points to 4-6% growth. That's a bad sign. Now, some of this, I think, is the big macro. CFO Trisha Toliver said, "We're operating in a fluid macroeconomic environment and one that creates fog for consumers with things changing constantly." If there's fog for consumers, it's translating into fog for the business, which is fog for investors, and investors are heading for the exits. Rachel Warren: I don't think we can really take a single quarter of Cava earnings and really make a holistic determination about the business. I think this is obviously one of those stocks that we look at as investors. The valuation is very high, and expectations, accordingly, are also quite high. The company has had one of the best financial performances recently across all comps leading up to this point. In Q1, that was definitely the case compared to other quick service competitors. But Q2 was more mixed. Cava same restaurant sales growth decelerated to 2.1%. That was quite a bit behind what analysts were expecting. They had been targeting more of the 6% range, but I will note this follows the first quarter. Where Cava's same restaurant sales growth was 10.8% up year over year. I think that there are some positive points to note, they also grew revenue by more than 20%, and restaurant-level profits grew about 20% as well in Q2. It's not all bad news. Travis Hoium: Same-store sales numbers have been absolutely crazy at Cava. Over 20% for a lot of the last couple of years, which is almost unheard of in the restaurant industry. That's why this is a stock that was trading, I think, right now, it's about 70 times trailing earnings. But this is also, as you're scaling your business, you're growing, entering new markets. Lou, do they have the right menu for the American eater right now? Burritos is something that translates to everybody. Is Cava going to be able to do the same thing? Lou Whiteman: I think that is a great question, and it has to be baked into the growth estimates. Full disclosure, Cava is my go-to. I love Mediterranean food, but we are a culture of pizza and burritos. I wonder they are only at 400 locations now. They have big plans to get, I think, 1,000 by 2032. Will they have success selling the Mediterranean diet versus pizza and burritos nationally? I think there's still a growth story here, but I don't know if the long-term trajectory, like if we compare it to some of these other big names, I don't know if it's going to turn out that way with their menu versus what you can do with a burrito place or a pizza place. Travis Hoium: It's easy to put a huge growth multiple when you have those same store sales. We still don't have Cava where I live, so this is one I would like to. Lou Whiteman: The American Heartland's a huge question, I think. Travis Hoium: Pizza, burgers definitely translates here. Don't know if necessarily Cava does. Rachel, what's the growth thesis? The stock has taken a beating, down over 50% from its highs earlier this year, much less its highs last year. What are you looking for for this to be a buy? Rachel Warren: I don't think the story is nearly as bleak as the market's reaction might have you think. I agree, the valuation is high, and I think one could even argue that a dropdown in shares have been warranted. But here's the value proposition you really need to be thinking about if this is a business that you're looking to invest in. This is a company with extensive growth plans. They're looking to reach 1,000 locations by 2032. That's up from 398 locations currently. Historically, this is a business that has boasted really strong unit-level economics, including high profit margins and average sales per restaurant. That's enabled them to fund that expansion with internally generated cash. Even if you look at the first half of Cava's fiscal 2025, you've got year-to-date free cash flow of about 22 million on about 612 million in revenue and 44 million in profits. Those top and bottom line figures were up 24% and 31% from one year ago. It's still a business with a really robust, addressable market, and they are still bucking that trend of same-store sales declines that we've seen from a lot of their competitors. I think that there's still a lot to like about Cava. Travis Hoium: Speaking of same-store sales declines, we're going to talk about Chipotle next and see why there are so many struggles there. We will get to that. When we come back, you're listening to Motley Fool Money. ADVERTISEMENT: Hello, podcast fans, I'm Bradley Simpson. When I think about the stories that stayed with me, one that immediately comes to mind is router. A talented router who just wants to cook, and honestly, I was glued to my screen straightaway. Now I'm hooked on FX's The Bar on Disney Plus. I love everything about it. I love the styling, attention, the drama. It's the best thing I've watched in ages. Only the greatest stories stay with you for a lifetime. Honestly, it's true. What would be your next great story on Disney Plus? Travis Hoium: Chipotle has been fascinating over the past couple of years. The stock's actually in its biggest drawdown, down 38% from its high in 2024. That's the biggest drop in shares since 2017. The big news over the past few weeks is that same-store sales, this number and concept that we keep talking about so important for restaurants, down 4% in the second quarter. The big change at Chipotle is that CEO Brian Niccol left for Starbucks. Is he a reason that Same Store sales are down, Lou, or is there something else going on? Lou Whiteman: I don't think he's the reason that same-store sales are going down. I do wonder, though, about where you go from here. I'll be honest, I'm probably more bullish on this company, as far as remaining a growth story, than I am Cava, although I'd prefer to eat at Cava. But bottom line, Brian, I think there is a CEO question here. It's probably unfair to Scott Boatwright, Brian Niccol's replacement, because he seems to have the credentials, but Brian Niccol is special. That is what we've been told to believe. He did an amazing job here. He's well thought of what he's done at Starbucks. If he is special, then I think you do have to ask questions when someone new comes in. It's no guarantee that the next person will be as good, and it's no guarantee that you can get this performance with average if you had someone special. I think there's just a lot of question marks around the company because of that. It might turn out to be unfair. It might turn out that everything's fine, and I do probably think so. But I do think given the leadership change in a tough macro environment, I think it makes sense for investors to have questions here. Rachel Warren: We know the market hates uncertainty, and that's certainly been, I think, a trend that's been reflected across a lot of stocks, including restaurant stocks. With Chipotle, specifically, I don't think that one can fairly attribute Chipotle's recent troubles to Brian Niccol's departure. Scott Boatwright is a veteran in the Quick Service restaurant space, long before Chipotle. I do think the ship is in good hands overall. Chipotle's performance within the fast casual segment is lagging peers right now. If you look at it at Q2, they had a roughly 6% drop in per-location traffic, and that was compared to a flat performance for the segment overall. They had a 4% decline, as you noted, Travis, and comparable restaurant sales, and that decline in comps was primarily driven by an almost 5% decrease in transactions. But ultimately, I do think that this is a consumer spending issue, not a fundamental weakness with the business. It's operating in a cyclical space. I think investors should not be surprised that the business is being impacted by the downtrend of that cycle right now. Travis Hoium: This has been one of the companies that's grown their same-store sales almost like clockwork, really, since they had that E. coli outbreak. The stock obviously cratered when that happened. But this is another example of a stock that was priced for perfection. Still has a $57 billion market cap. We got 30 PE multiple on a forward basis. Is the growth story over? I think that's the big question for investors right now. You start to have negative same-store sales comps, and you're paying a pretty high price still for Chipotle. Can they get that magic back, or is something fundamentally changed for Chipotle, Rachel? Rachel Warren: I do not think that the growth story for Chipotle is over. I want to take a step back for a minute. If you look back to last year, Chipotle essentially outpaced the growth of the restaurant industry, where a lot of key names were already experiencing sales and traffic declines, and that trend only really started to affect Chipotle's business at the end of December. If you go back to their Q1 earnings call, Boatwright said that diners' concerns about the economy had led them to skip restaurant visits and maybe save their money instead. You fast-forward Q2. May was a tough month for Chipotle, but by June, same-store sales began increasing again, and Boatwright said that by exiting the quarter, they had begun to return to positive comp and transaction trends, which continued into July. I do think that it is important to take a more nuanced view here. There could be some bumpy quarters ahead, but a solid market and leadership position, I think, still gives this company a long-term advantage. Lou Whiteman: They're at under 4,000 stores. They hope to get to 7,000. As I said, the style of food. I'm more confident that they can get there. I think the Cava gets to 1,000. Maybe not 7,000, but at least big growth from here. I think it's easier to expand once you have that scale and critical mass, too. It is an easier ramp. I think there's also that lever of breakfast, which we've been joking about forever, but that makes more sense here as far as just expanding the comps. Travis Hoium: Where are we going to get some breakfast burritos? McDonald's has that. Rachel Warren: I'd be down for that. [laughs]. Lou Whiteman: That seems a lot easier here than it is for Cava again. Again, I don't want to be too hard on Boatwright. I think he's the right person for the job, but I do think the wildcard here, you're getting a much better valuation than Cava. Cava before trading this morning was, I think, 4x, the forward valuation, so you're getting a better valuation. But if you buy into the fact that they had a best of class CEO before, will there be some drop off? If so, how does that affect the business? I don't think that is a bare case, but it is at least a question for the bulls that we only time will answer. Travis Hoium: We're going to take a bit more of a macro view of the restaurant industry and talk about a tech company you may be interested in. We'll get to that next. You're listening to Motley Fool Money. Given that operating leverage, restaurants have been phenomenal winners for investors who have been able to buy at the right price and hold for a long time. Chipotle, McDonald's, going back decades, even Starbucks, if you want to add coffee into this. But we're seeing a huge pullback in a lot of restaurant stocks. We haven't even talked about Sweetgreen. That's down 70% this year. Lou, is there something specific with restaurant stocks? Is this a macro story? What do we need to take away? Because we've been hearing multiple things from different companies, and these consistent growers just aren't growing anymore. It seems like some canary in a coma. Lou Whiteman: I think there's two related macro trends going on here. The first is I keep calling it the boiling frog economy. I think things seem better than they are because it's just slowly inflation is creeping up, and so I think it is affecting consumer habits. Travis Hoium: By the way, inflation is one of these things that comes up on every one of these conference calls. Lou Whiteman: Absolutely. Travis Hoium: If prices are up; it gets very specific for us. Lou Whiteman: It hits on both sides because it hits on their costs, and it also, I think, does influence consumer behavior and maybe bring down traffic. Also, I think it's interesting and maybe this is related. If you look at this quarter, full-service restaurants have outperformed fast food and fast casual in a big way. Talk about comp sales. Chilli's is out this morning, up 22%. Olive Garden comp sales, up almost 7%. Same with Longhorn. Texas Roadhouses up 6%. You compare that you mentioned Sweetgreens, which is fast casual down almost 8%, Wendy's down 4%, Jack in the box down 7%. I don't know exactly what is going on here. I suspect that maybe if people are eating out less, they are just one atmosphere, and they're like, instead it's just that incremental stop three times a day that's going away, and special occasions are holding on. But I do think that the restaurants are telling us something about just the state of the consumer. Travis, you're right. It's not something we're hearing universally. I do wonder if this is a canary. Rachel Warren: I do think it's a really interesting dynamic we're seeing right now. We know, and we're witnessing the ways in which the macro environment is giving consumers pause. We're seeing consumer sentiment numbers that come out. We are seeing consumers shifting their spending behaviors, but they're not curtailing all discretionary purchases. Obviously, there's been a shift toward essential items like groceries, but then there's discretionary areas that have shown significant resilience, like spending on leisure travel and other big-ticket items. But it's been really interesting to see the ways in which some of those trends have and have not trickled down to restaurant spending. There seems to be a lot more nuance. I do think Lou's right. Consumers are becoming increasingly picky about where they want to put their money to work. I think that's a reality that a growing number of restaurants are contending with. I see a lot of consumers prioritizing value. Maybe if they're going to spend money to go out to eat, they'd rather have that sit-down experience than a quick grab-and-go. At least right now, I think that is a common through line that we are seeing in restaurant earnings. Travis Hoium: It's so interesting that value has become the sit-down experience. Even going back to 2008, 2009, you would see pretty good numbers from McDonald's because people stopped going to sit-down restaurants and traded down to McDonald's. Now, it seems like prices have gone up at a lot of those fast casual, fast food places. You're right. If I'm going to go and take the family out to eat, do I want to spend 40 or $50 at McDonald's, or do I want to spend 60 or $70 to actually sit down and have full service? It seems like a lot more people are doing the full service choice, but we'll see how this plays out. This is going to be fascinating because Lou, restaurants really tell us a lot about what consumers are choosing. Lou Whiteman: To me, I think you're still going out with the family to celebrate a birthday or something, and that's why you're still seeing it. But if you're racing home, you could either make a PB&J at home or grab a Big Mac. I think that's where maybe the little bit of cost creep and the pressure on the household budget, maybe that's where it's showing. Travis Hoium: One company we haven't talked about, the real technology play in restaurants is Toast. Toast seems to be just benefiting from all trends, it's not only growing in some of these sit-down restaurants, which is where they're going to have a majority of their business, but also just adding more restaurants. They euro 24.8% in the quarter. We're talking about negative same-store sales comps for some of these companies, but Toast seems to just be crushing it. Is this something that can continue, Rachel, for the foreseeable future, for Toast? Rachel Warren: I think that they are on a very impressive growth trajectory right now. I would expect, as the company becomes more mature for that to slow, but that doesn't appear to be something that's going to happen anytime soon. In Q2, they added a record 8,500 net new locations. Their enterprise international food and beverage retail segments passed 10,000 live locations. They onboarded another 1,300 unit chain to the platform. They even launched their first customer in Australia. Another thing that's key here is that Toast is expanding beyond restaurants. They're broadening their focus to include retail businesses, convenience stores, bottle shops, grocery stores. That allows them to offer their technology solutions to a much wider range of clients, and they provide that core infrastructure for these businesses. One final thing. They just signed one of the biggest deals in their company history with Applebee's. This is as they onboarded Top Golf as a new client. They inked a strategic multi-year partnership with American Express. There's a lot of good things going on for Toast right now. Lou Whiteman: I think Toast is the winner here, and I think they've done a really good job. I guess my surprise is that I don't really get excited about any of these companies, even the winner. Just I don't like this category as a long-term investor. If you judge this as a FinTech, I see much better margin opportunities than other FinTechs. This strikes me as a commoditized business by its nature. If you judge it as a service business or it as a service business, Software as a Service or whatever, I just see much more stable TAM opportunities. You have a company, the share count going up, it's priced at more than 40 times earnings. I really like the company, but I fail to see the investor excitement about this. I feel like they're a winner here, and it's a pretty blah business, once it levels off from early stage growth. Travis Hoium: Final question, you have to buy one restaurant stock today. We got some pretty good discounts from previous prices. Rachel, which one are you adding to your portfolio? Rachel Warren: Honestly, I got to say Cava. I'm still really bullish on that business. I like it. If anything, I think I'm intrigued by the fact that it's trading at a discount right now because the business still looks good to me. Lou Whiteman: It's cheaper than it was. I don't know if I'm ready to buy it yet. I might choose Cava just because just as a consumer, I wanted to go up, but I do think whether it's Brinker, whether it's Darden, just one of these tried and trues, that's probably where I would look to invest. Travis Hoium: I would love to buy Toast. I can't get over the price. If we keep getting discounts for some of these stocks, that's the one I would love to add to the portfolio. As always, people on the program may have an interest in the stocks they talk about in the Motley Fool may have formal recommendations for or against. Don't buy or sell stocks based solely on what you hear. All personal finance content follows the Motley Fool editorials standards and is not approved by advertisers. Advertisements are sponsored content and provided for informational purposes only. See our full advertising disclosure. Please check out our show notes. We have Lou Whiteman, Rachel Warren, and Dan Boyd behind the glass and the entire Motley Fool team. I'm Travis Hoium. Thanks for listening. Motley Fool money will see you here tomorrow. American Express is an advertising partner of Motley Fool Money. The Motley Fool has positions in and recommends Chipotle Mexican Grill, Starbucks, and Toast. The Motley Fool recommends Cava Group and Sweetgreen and recommends the following options: short September 2025 $60 calls on Chipotle Mexican Grill. The Motley Fool has a disclosure policy. Why Investors Have Soured on Restaurant Stocks was originally published by The Motley Fool Error al recuperar los datos Inicia sesión para acceder a tu cartera de valores Error al recuperar los datos Error al recuperar los datos Error al recuperar los datos Error al recuperar los datos
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07-08-2025
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The Fed's Inflation Conundrum & an AI Billionaire Battle Royale
In this podcast, Motley Fool analyst Jason Moser and contributors Travis Hoium and Lou Whiteman discuss: The Fed's decision to hold rates steady. Apple and Amazon earnings. An AI billionaire battle royale. Stocks to watch. To catch full episodes of all The Motley Fool's free podcasts, check out our podcast center. When you're ready to invest, check out this top 10 list of stocks to buy. A full transcript is below. Should you buy stock in Apple right now? Before you buy stock in Apple, consider this: The Motley Fool Stock Advisor analyst team just identified what they believe are the for investors to buy now… and Apple wasn't one of them. The 10 stocks that made the cut could produce monster returns in the coming years. Consider when Netflix made this list on December 17, 2004... if you invested $1,000 at the time of our recommendation, you'd have $619,036!* Or when Nvidia made this list on April 15, 2005... if you invested $1,000 at the time of our recommendation, you'd have $1,092,648!* Now, it's worth noting Stock Advisor's total average return is 1,026% — a market-crushing outperformance compared to 180% for the S&P 500. Don't miss out on the latest top 10 list, available when you join Stock Advisor. See the 10 stocks » *Stock Advisor returns as of August 4, 2025 This podcast was recorded on August 01, 2025. Travis Hoium: There was a flood of earnings this week, but the Fed was investors' focus. Motley Fool Money starts now. I'm Travis Hoium joined by long time Fools, Lou the Legend Whiteman, and Mr. Pop culture Jason Moser. Today, we're going to cover earnings from Apple, Amazon, and, of course, some AI News. But first, the Federal Reserve. The Fed continues to get more attention than I can remember in my 30 years of investing. They decided to keep rates steady this week at 4.25-4.5%, much to the dismay of some, but let's get beyond the catchy headlines. If the Fed cuts rates, and they control the Fed funds rates by, let's say, 1%, something that a big cut that a lot of investors would love, that doesn't necessarily mean that your mortgage is going to go down and become cheap again like they were a few years ago. Jason, what is signal, and what's noise here from the Fed? Jason Moser: Glad you brought that mortgage point up there, because I think that's been a narrative, I think that's been going around for a while, we need to bring these rates down so we can loosen the housing market back up. But listen, if mortgage rates right now at 6.5-7%, we start seeing these little incremental cuts. We're not going to be seeing those 4%, 3% mortgage rates anytime soon, if ever again. Most people I know, I certainly took advantage of it when I could. Most people have refinanced and got that 3%, 30 year fixed rate. It's going to be a new paradigm here. I think, in regard to the noise, I think the noise is the ongoing battle between the administration trying to push for these rate cuts. I think we can all agree that the Fed should be making decisions based on data and not political demands. That mandate that we typically refer to in regard to the Fed is essentially to conduct monetary policy with two goals in mind, maximum employment and stable prices. They're using data to make these decisions and not catering to the political demands that we see every single day, it seems like now. I for one, am actually relieved, really to see that the Fed is standing its ground here, and Jerome Powell is, I think, diplomatically playing his hand. When we look at where inflation stands today, we saw right on Thursday the report that personal consumption expenditures price index, that main forecasting gauge, it moved up to 2.6% in June. That was the highest since February. Then core inflation, which excludes food and energy, was even a little bit higher at 2.8%. While the inflation picture is improving from some time ago, we're not out of the woods yet. I think the Fed is doing the right thing and really playing this deliberately. They're not taking any knee-jerk reactions, not kowtowing to the political rhetoric that's going on out there, maybe we see a rate cut or two here by the end of the year, but like you said, it's going to have such a modest impact overall. I think we got to probably keep our expectations in check. Travis Hoium: Let's put some more data to that, too. The unemployment rate just came out this morning, 4.2%, same as it was a year ago. With this dual mandate, that doesn't seem to be a problem. If you're Jerome Powell, the worry is inflation. We haven't really seen the impact of something like tariffs yet. The other thing to bring into this is that the Fed controls short term rates. The market controls long term rates, and it's been interesting as there's been more speculation that rates are going to fall. Sometimes those long term rates actually go up, which is a market reaction, not necessarily something the Fed can control. But what do you think, Lou? Lou Whiteman: I spot on what you guys are saying. I continue to believe the Fed will be much more reluctant to cut than what conventional wisdom, what everybody's saying. Rates are the primary blunt instrument that the Fed has, and I don't think they were enjoying life when rates were at zero, and they didn't have any levers to pull. Signal noise, I think the signal is the actual decision is the fact that, look, hey guys, we're fine here. The noise is all the commentary around it. The economy looks I don't know if it looks great, but there's things to worry about, but it actually looks pretty OK. We should be celebrating that. Be careful what you wish for here. If the Fed suddenly goes into dramatic rate cutting mode, I don't know if that's going to be something we're going to be celebrating. Travis Hoium: We should touch on inflation at least a little bit. Like Jason said, we did get some data this week, and anecdotes are always a little bit dangerous, but my wife went back to school shopping. It's apparently time to start thinking about that already in July. But she went back to school shopping, the first thing she said when she got home was, it's not even fun anymore because prices are so high. How does this murky inflation picture play into things and how we should be thinking as investors, Jason? Jason Moser: It is. The cost of living has seemingly gone up across the board. Just as a father of two college students, boy, you want to talk about back to school shopping moving from shirts to mini fridges and whatnot. Lou, you know what I'm talking about. It definitely does. It definitely does seem to only be getting more expensive. We've been talking about this all year. It's starting to get a little bit frustrating, but write the T word tariffs, and how is this ultimately going to impact us? It seems like every week when we have these discussions, it all boils down to, we just don't know. Amazon CEO Andy Jassy even said it in the call. In regard to tariffs, they simply just don't know because every day it's a headline that seems to counter what was said the day before. The one thing that we do know is that tomorrow there is going to be another headline that says something else. Until we actually get a little bit more clarity and a little bit more certainty and understanding as to exactly what the administration's trying to ultimately accomplish or what the end goal is, we are going to see a lot of that noise like we were talking about before here, and it just becomes very difficult for investors to fully make sense of it all. That's why I think, when you look at the way the market's performed year to date, the market it's performing OK. Today's obviously a little bit of a sell out there based on the unemployment data. But overall, the market has had a decent year thus far, given all of the noise that we've been hearing. I think investors, they're starting to throw their hands up and say, you know what? We're going to admit it. We don't know what we don't know, and there's only so much we can control here. It's important for investors, I think, Number 1, to remain focused on that longer term picture and just focus on the fundamentals. If you're indexing, keep on indexing. If you're focused on investing in individual companies, focus on the fundamentals, businesses that can weather storms like these times of uncertainty like these, because one thing is for sure, this won't last forever. Lou Whiteman: It really feels like, I call it a boiling frog economy. Investors have been focused for months on headlines, inflation, tariffs on Main Street. Well, it's not really about headlines. It's about these things just creeping in overtime. I'm still hopeful we're strong enough to weather higher costs, and it's not going to just crash the economy. If nothing else, it feels like the second half of the year. I don't know if there will ever be that clarity. I don't know if there will ever be that headline that just solves things, but I think it's just going to be a slow grind if we're going to hear more and more about costs. I do think at some point, it starts impacting consumer decision-making, and maybe the investor debate is, to what extent? Like Jason says, we're just going to have to wait and see. Travis Hoium: Someday this won't be a lead topic on Motley Fool Money, but that day is not quite here yet. Lou Whiteman: Not today. Jason Moser: As we move to earnings, Meta was one of the big earnings reports this week. Revenue was up 22%-$47.5 billion. Net income jumped 36%-$18.3 billion, one quarter. They made $18.3 billion. Somehow, they found 6% more daily active users than they already had. Lou, what jumped out to you in the quarter? Lou Whiteman: That's it. Who knew there were actually more people out there that Meta hasn't found yet. That's always amazing when it goes up. But kidding aside, you hit on it. The core business, that advertising business is just a fabulous business, 8 billion in free cash flow in the quarter, and that's with all the investments, that's actually down. But the other thing that stands out I'm not the first to notice this, but Travis, they are putting that money to work. CFO, Susan Li said, We really believe this is the time for us to make investments and investing they are CAPEX more than doubled in the quarter. They made it crystal clear that will continue. They're making all the money, but boy, are they spending. Travis Hoium: That CAPEX number, they didn't actually raise it the way that Alphabet did, but they did pump it up a little bit to 66-$72 billion, the higher end of their previous range. The other thing, Jason, they talked about was this superintelligence plan that Mark Zuckerberg has for bringing personal superintelligence, and he threw some arrows at other big tech companies. Jason Moser: He did. It's this difference in opinion there on, are we going to be using AI to lift ourselves up at the personal level, or are we going to be using AI to ultimately replace what we as people, as employees do today. He's taking the bet that we will be able to use AI to lift ourselves up more on the personal level and become more productive. I like that vision. I think that's something we all are aspiring to do with technology. It's been interesting to watch the evolution of Facebook slash Meta. Social media company, to Metaverse company now to AI company. I think that with Meta, the important thing to know, this is still an ad business, like Lou mentioned. They're using AI to make their core business better, and they're seeing greater efficiency and gains in the recommendation model for ads. It drove roughly 5% more ad conversion on Instagram for the quarter and 3% on Facebook. It's bringing more engaging experiences to users. Helping users discover content they find most useful in AI technologies leading it led to a 5% increase in time spent on Facebook and a 6% increase in time spent on Instagram for the quarter. I think it's interesting to note how the company is using AI. It may not be so explicit for us as users, for users of the platforms but what they're doing with that technology to make their core business more efficient it driving that net income number, like you said, 36% of it with 38% growth in earnings per share, that's just amazing to see. Travis Hoium: It's not driving results yet, but they did talk a lot about momentum that they have in glasses. I know, Lou, you got to be an early adopter of these glasses. Lou Whiteman: For one thing, can we just say that some of this Zuck talk, it's got an imaginary friend vibe, and I'm not sure what about that. We'll see. But the glasses, Zuck, first of all, I wear glasses. You got to fill my prescription, if you want me to wear these, because I don't know if I have a lot of desire guys, to spend more than I already. Even with Warby Parker, thank you. But just to use my phone less, I don't know if I'm really there. Travis, I can't really think of why I would be an early adopter here. The tech is neat. I think it's really cool, but if all you're really doing is meaning I look at my phone seven times less because I'm always looking at my glasses. Travis Hoium: You're still looking at something? Lou Whiteman: That's true. Travis Hoium: Well, when we come back, we're going to get two more earnings reports from this week. This is Motley Fool Money. Lou Whiteman: Wish you could lock in rates without locking out liquidity. Meet LDDR a LifeX Treasury Bond Ladder ETF built to simplify your cash flow plan for the next 10 years. With LDDR, you can lock in today's interest rates for a decade. It's built to deliver predictable monthly cash flow that boosts interest income by including tax-free return of principal. That means the potential for higher, more stable cash flow without worrying about rate cuts, reinvestment risk or market swings. LDDR, take the guesswork out of your cash flow plan. 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The LifeX income ETFs are distributed by Foresight Financial Services, LLC. Travis Hoium: Apple reported earnings after the market closed on Thursday. Market seems to be happy with the results and the momentum is strong in everything but wearables. Lou, what do we need to know about Apple's second quarter? Lou Whiteman: For a MAG-7 stock, we came into earnings season with a lot of uncertainty with Apple. The company had warned of a potential $900 million tariff hit and single digit growth, but this quarter, much better than that, 10% top line growth, 12% earnings growth, 46% growth margin, stronger than expected iPhone sales. Travis, we even saw a return to growth in China, which was a nice surprise. We haven't seen growth in China for a while. Lou Whiteman: There are a lot of unanswered questions, and those questions remain unanswered. Some of this momentum could be a tariff pull forward. We'll figure that out. They're still trying to figure out AI. They're still in search of that next big thing, the must have device. This quarter didn't answer any of those big picture questions, but it does remind us of the obvious to think right in front of our face that Apple is a fantastically profitable company with a terrific franchise and a lot of options to partner for AI, a lot of ways to win. Bold prediction here, guys, I know Apple maybe they do have some drama, maybe they have some questions, but they're going to be fine. This quarter is a good reminder of that. Travis Hoium: They even opened up the possibility of making some acquisitions in artificial intelligence, which could get them from nowhere to at least in the ballgame. Jason, Amazon has been in the Motley Fool's portfolio, and recommendations for about 30 years now has made a lot of investors a lot of money. But the company isn't the growth engine that once was revenue for the second quarter was up 13% to $168 billion. Net income jumped almost 50% to 18.2 billion. What was your takeaway from the quarter? Lou Whiteman: I mean, I think you're right. I'm thankfully one of those investors have been able to hold on to these shares for a long time, and it's obviously done very well for a lot of our members, a lot of investors everywhere. But you're right. This isn't the same growth story as it was before. I mean, it's such a big company now. I mean, those numbers just have to pull back a little. I think you're looking at 13% top line growth there. I think that was relatively impressive. But I think when you look under the hood with Amazon, that's when you start really realizing that this is not just an e-commerce business, and there are so many other powerful parts to this company that are helping drive growth. Now, I think what we talk about often with Amazon is AWS, Amazon Web Services, and that has really grown to become a big driver of the company's overall profitability. I mean, it's essentially responsible for most of its operating profit, if we're being honest. That growth there, 17% to $31 billion for the core. That was good. Now, it seems like the WISPR numbers out there, the market was expecting a little bit more somewhere in the neighborhood of maybe 20%, and when we see the competition coming from companies like Alphabet and Microsoft as they build out their web services aspirations, their cloud businesses, I mean, we're starting to see Alphabet and Microsoft, they're taking some share. I think that's something at least to keep an eye on there in regard to Amazon. I mean, Amazon had a big head start. They used that philosophy of just continuing to drive down prices and offer new services and features for users, and that did a great job of gaining a dominant presence in the market really fast. But you look at companies like Alphabet, Microsoft, they are they're catching up. I think that's something that investors will want to keep an eye on here in the coming years. Now, the other thing with Amazon that I think it just doesn't get as much attention but the thing that continues to stand out to me is this advertising business that they built. Travis, I don't know if you've looked at this lately in regard to their ad business. I mean, this is sneaky, but it's really powerful. They grew revenue in the advertising business 22% for the quarter, and they continue to ink important relationships with companies like Roku and Disney. I mean, they're reaching 300 plus million, household, 300 plus million users out there on a daily basis with all of their content, the many ways they have to distribute it. Then the other part of the business, we talk about that demand side platform business, the DSP, and the company that we always shine the light on there is The Trade Desk. The Trade Desk, tremendous company, a company that has done very well for investors. I'm included there, so I'm thankful for it, also. But let's put it into context here. The Trade Desk trailing 12 month revenue is $2.5 billion. Amazon's ad business just brought in $15.7 billion this quarter alone, and it's continuing to grow at those double digit rates. I think it's worth looking at Amazon and saying, You know what? This is a business that's made up of a lot of different parts, and they're executing very well, but definitely, when you look at that web services side of the business, I mean, the competition is heating up there, and I think it's going to be a little bit tougher days ahead for them to really maintain that dominant position. Travis Hoium: That will be the thing to watch, and to the advertising point, it's interesting that the market is very concerned about Google's ten Blue Links and artificial intelligence disrupting that but not as concerned about Amazon's ad business. As always, people on the program may have interest in the stocks they talk about and the Motley Fool or may have formal recommendations for or against, so don't buy or sell stocks based solely on what you hear. All personal finance content follows Motley Fool's editorial standards and is not approved by advertisers. Advertisements are sponsored content and provided for informational purposes only. To see our full advertising disclosure, please check out our show notes. Next up, we're going to have a battle of the AI billionaires. You're listening to Motley Fool Money. Lou Whiteman: We already knew that Big Tech was going to go all in on artificial intelligence, but the stakes have gotten even higher over the past week or two. Alphabet up their CapEx budget from $75 billion to $85 billion this year. Promise to even increase that next year. Amazon and Microsoft are spending about $30 billion a quarter, and Medes CapEx is going to be right around $69 billion for the year. There are still a few VC companies involved here, like Open AI anthropic and perplexity, but a lot of the small players are falling by the wayside. I thought it would be fun to look at artificial intelligence and put these companies and their leaders in a battle. I'm going to call this the AI billionaire Battle Royale. I'm going to give you guys the opportunity to pit some of these leaders against each other and give us a score like a boxing scorecard. Ten, nine, ten, eight, if it's really a landslide. If there's a draw between both of you, I'm going to decide the winner here. Let's choose wisely. The four players that we have here, I'm not going to put Elon Musk in this, but we have Sundar Pichai of Alphabet, Mark Zuckerberg of Meta, Site Adela at Microsoft, and Sam Altman of Open AI. I think those are the really big names in artificial intelligence really guiding the industry right now. Our first battle has real beef today, Mark Zuckerberg versus Sam Altman. Zuck has been buying up Open AI's talent, reportedly $100 million offers for AI engineers, and he's spending that money because he's trying to go from lagger to hopefully leader in AI. Lou, give me some blow by blow on who wins this battle. Lou Whiteman: My mental picture here is Sam Altman comes out, dressed to the nines, perfect, just looks the part. Zuckerberg almost comes out like a street fighter. But when the actual fight starts, it's not even close the other way. Zuckerberg is playing catch up, but Zuckerberg's got this massive ad business generating capital at his back as he's throwing punches. Altman has to beg for money and has done a lot of deals because of the nature of Open AI. He's actually in the background while he's fighting his opponent. He's also fighting Microsoft and things like that as he runs off to the side. Travis Hoium: He's doing a dual battle. Lou Whiteman: Yeah. This ends up, flashy coming in, looking really great. Sam Altman, he gets a few punches in. I don't want to be too dismissive of Open AI, but that advertising business, the muscle to play the game that goes with that, this ends up 10:8 Zuckerberg running away. It could even be a technical knockout here. Travis Hoium: Lou thinks the balance sheet is going to be more important than the mind share that ChatGPT already has. What do you think, Jason? Jason Moser: Well, one of these things is not like the other. I mean, we've got Meta, which is publicly traded company. I mean, it has many more levers to pull in regard to raising capital. It's just many more avenues toward raising that capital, whereas, as Lou noted there with Sam Altman, I mean, he has to sell the sizzle. He has to get out there and keep that mind share going and figure out ways to raise that money. Now, will we see Open AI go public eventually? Who knows? If they do, then obviously that opens up some avenues for them. I tell you. You look at what Mark Zuckerberg has done with Meta to date. I mean, the IPO back in, I think, what May of 2012, the stock is up better than 1,900% since then. I mean, he's doing something right, and I think he's doing something right in the face of making some questionable decisions along the way. I mean, we were talking earlier about the evolution of Meta from social media company to Metaverse company. I mean, that metaverse thing just hasn't really worked out. He was able to burn $15 billion or so a year and it just didn't really matter. Travis Hoium: It didn't matter at all. I mean, they're doing some cool stuff, but it's not having any a material impact on the business really. It's still at the end of the day. This is an advertising business, and I'm not saying that as an insult. It is a very powerful advertising business, and he's finding ways to utilize AI technology to make that advertising engine more powerful, more efficient. In April, Zuckerberg said that Meta is focused on developing an AI model that can in turn build as much as half of other AI models within the next year, which I think is just amazing to think about. Altman, he's a unique guy. He's got all sorts of interests. I think fascinating. He's got his pilot's license. He's expresses his dreams of starting his own airline one day. You do have to wonder where his head's at sometime and if this is really what he wants to be doing for the long haul. I'm in agreement with Lou there. I'm not going to go with a 10:8 blowout. I would probably just go 10:9 in favor of Zuckerberg, in this case, just because I think Meta has so many more ways to really raise that capital and continue building out these AI aspirations. Lou Whiteman: Let's remember here, guys. One of these two is actually a trained kickboxer, too. I know we're not talking about physically fighting, but that has to come in somewhere. Travis Hoium: There was that planned actual fight with Ion Musk at one point that never actually happened. Lou Whiteman: It's amazing, too, to think about these two guys that dropped out of college. Mark Zuckerberg drops out of Harvard, Altman drops out of Stanford. I mean, these guys are living the life. It's it's fascinating to see. Travis Hoium: It's interesting that you both had it pretty decidedly for Zuckerberg. I don't know that I would have guessed that going in because ChatGPT, everybody thinks that they're the leader in the club house. To the second one, this is the non founder battle. We have Sundar Pichai from Alphabet, Sati and Adela from Microsoft, also Same Alton's partner, sometimes on again off again. Jason, you're up first here. These companies have more money in infrastructure than anyone else we're talking about, but who wins about. Jason Moser: Two really amazing businesses, two very impressive leaders there, and you look at Satan Adele. He took over the CEO role in February of 2014. Stock is up better than 1,300%. I was close to 1,350% I think since he took over. If you remember, I mean, during the Balmer years, it was like ten years where the stock did nothing at all. Shareholders have got to really be loving him, and he's a thoughtful guy. Guy, he reads poetry, Indian American poetry. He loves Russian novels. I mean, he's a thoughtful guy, and he clearly has the background, master's degree in computer science, master's degree in business administration, and he said back in April that as much as 30% of the company's code is now actually written by artificial intelligence. They certainly are using AI to their benefit. I think when you look at Sundar Pichai, I think he's been a very effective leader, as well. I mean, Google, Alphabet shareholders have won. They've done well. Stock is up, I think, 200% since he took over in December of 2019. But I think he's dealing with a little bit of a different situation here, Alphabet, particularly in regard to the regulatory issues. I mean, there are a lot of unknowns in regard to the remedies that might be suggested as far as what regulators want Alphabet to ultimately do if they want them to split off part of the business, whether it's YouTube or Search or sell off Android or what not. I think there's a little bit more uncertainty there right now, and I think that with Nadella's position being with the company a little bit longer than Pacays been with Alphabet, I'm going to give Satya Nadella the lead here. I'm going to go 10:8 in this case, actually. I really have been so impressed with what Satya Nadella has done with Microsoft during his tenure, and it seems like he really is enthusiastic and looking to keep it going. Travis Hoium: Interesting. The fact that Sam Altman and Open AI have been ungrateful partner after really Microsoft funded the company, gave him $10 billion. I think that was almost immediately after ChatGPT released. That doesn't take too much away. Lou, who do you have in this battle? Lou Whiteman: This is the heavyweight battle. Not to switch sports, but if this was the final four, we'd all be complaining that the two best teams were meeting in the semifinal. That's my take on here, because Jason's two great businesses, two, I think, heavyweights the two will come out swinging. Lou Whiteman: I'm going to end up with Nadella here, in part what Jason said, they can both throw a punch, but we have to see about how Pasha can take a punch. I think because there are questions about the advertising business. I think it works out fine, but there are those questions. The other thing I'd say that I think gives Microsoft and Nadella the leg up here is when they go on the offensive. Of all of these big companies, Microsoft, with the nature of their business and all of the conduits they have into corporate customers with office, with 365, with so many products, they, to me, have the clearest path to actually monetize all of this AI stuff outside of internal use outside of just building their business. It just seems like their existing connections work so well when you go on the offensive. Yeah, they both come out swinging. They both land some blows, but Nadella is just a little bit stronger on the punch and shy between the advertising business, the regulatory, maybe, can't take the blows the same way or it has to take a few more blows. I'll go 10, 9 here, but I get it. Definitely I don't see this as a knockout, but I think Nadella wins for me. Travis Hoium: Our championship is Zuckerberg versus Nadella. Lou, I'm going to go to you first, between those two. We've got basically founder led company in Meta platforms. Yeah, changed its name. Gone from social media to Metaverse, now to artificial intelligence. But it is a founder. I think it's pretty clear that he's been a good leader, especially over the past few years, and Nadella running one of the biggest most established tech companies in the world. Who do you have? Lou Whiteman: This could really be fun to watch and no disrespect to here. But if this was wrestling and not boxing, you can see Zuck playing a little dirty here, can't you? I mean that with respect. I think this would be a fun one to watch. I do think, though, again, I said I thought the second bout with two heavyweights, Microsoft not just what they're investing. But Nadella, his plan to monetize it and actually get it out, I'll be honest with you, I'm kind of annoyed with some of the prompts I'm getting in Excel right now. Microsoft, I will let you know if I need Open AI. You don't have to ask me every time if I want to use it, but I do think that as annoying as it is, just like Clippy it works. I think that they are the grand champion here. Zuck will get some blows in. Zuck will definitely go on the offensive all over the place. I think it's probably a closer fight than I thought when I sat down, so I'll say 10, 9, but I am going to crown a champion at Microsoft and Nadella here. Travis Hoium: What about you, Jason? Jason Moser: Travis, I'm going to have to agree with Lou here. I'm going to go ahead and give you the answer first. I would have to give the nod to Nadella here. I think part of it, I think the market is telling us something along the way here. We're looking at Microsoft. It just crossed over that four trillion dollar market cap this week. Joining Nvidia is one of only two companies to ever do that. Now, Microsoft, yes, generates a little bit more on the revenue side than Meta does today. But I think what we've seen with Satya Nadella during his tenure at Microsoft is very clear vision. We've seen him lay out the strategy. He knew that the puck was going toward the Cloud, so he started skating there immediately. He laid out that strategy from the very beginning, and it was just very clear. We could see what he was doing. We talk about Amazon before being a company with a number of different ways to win. They do a few things they're doing very well. Microsoft is a similar business. They have a number of different ways that they can win, and just the scale the company has and the operating platform and the cloud services that it provides. I think it just does a lot of things very well. It's not to take anything away from Meta and Mark Zuckerberg here. I think that the one concern I have, and I'm not a shareholder of either company. But the one concern I have with Meta is Mark Zuckerberg can be all over the place. We talked about that before social media to Metaverse to AI to what's going to be next. He does say a lot of things, and then it does materialize. He pushes it by the wayside and then goes toward something else. What we ultimately have here is just a massive social networking company with a tremendous advertising business behind it. I think that's something that's going to continue. But, as we've seen with Facebook, Facebook is starting to go on the, I don't want to say the decline, but more interest is on the Instagram side. Social networks aren't forever. I think they live their life, and then people go elsewhere. I would be a little bit concerned just in regard to the lifespan of things like Facebook and ultimately Instagram at some point. Now, they have WhatsApp obviously, which has got a lot of potential there, as well. I think we probably could expect to see Meta make more acquisitions down the road to try to expand that portfolio of platforms it has. But for me, if I'm looking at it from a confidence level, I just feel more confident with Satya Nadella and the clarity of his vision and what he's done with the company to date. I'm going to give it 10 to 9 in favor of Satya Nadella. Travis Hoium: Interesting that there's regulatory concerns for alphabet, but Meta could make acquisitions. I don't know if the government would let any of these companies make any real acquisitions, although that's not what they're doing anymore. They're just buying talent, so maybe that's the way around that. Lou Whiteman: Yeah, they definitely be under the microscope, for sure, going forward. Travis Hoium: Interesting that you guys we're basically in agreement, and I completely disagreed on every one of your choices. I would have had Sundar Pichai in the lead here, for sure. But this is going to be fascinating to watch because there's literally hundreds of billions of dollars at stake for these big tech companies, and even for them, that's a lot of money. Next up, we're going to get to the stocks on our radar. You're listening to Motley Fool Money. Ready to launch your business, get started with the commerce platform made for entrepreneurs. Shopify is specially designed to help you start, run, and grow your business with easy, customizable themes that let you build your brand, marketing tools that get your products out there, integrated shipping solutions that actually save you time from start-ups to scale ups, online, in person, and on the go. Shopify's made for entrepreneurs like you. Sign up for your $1 a month trial at Travis Hoium: We have time for one quick earnings take and Cloudflare is one of those interesting companies in technology. Jason, what did we learn this quarter? Jason Moser: Interesting reaction right after the release stock was up 6% that we saw this morning down 6%. Now it seems like it's about flat, but I think it was a very encouraging quarter from a number of perspectives. For one, we did not hear mention of elongated sales cycles in the call anywhere, Travis. That may mean that their enterprise customers are feeling a little bit better about the money that they're spending, and that is definitely showing up in the numbers. Revenue was up 28%. They crossed over the two billion dollar annual run rate. It is a company that continues to sign on to develop relationships with large customers. Now, 3,712 large customers spending at least $100,000 annually. That was up 22% from a year ago. Those customers now account for 71% of total revenue. That's up from 67% a year ago. Encouragingly, dollar-based net retention rate, which is a metric we pay attention to that tells us how they're expanding those relationships that rose to 114% for the quarter, that was up from 112% a year ago. Again, that's just a sign that they continue to keep those customers and develop new relationships, expand those relationships. Not a lot to see here. I think this was just another solid quarter from Cloudflare and CEO Matthew Prince seems really amp about the company's future. Does the fact that the stock is trading for 40 times sales make you nervous? Lou Whiteman: Yes, I think valuation is going to be the biggest risk for a company like this. Until they can get to actual profitability and cash flow, valuation is just going to be one of the biggest risks withholding a company like this. Travis Hoium: We like to end the show with stocks on our radar. Jason, your first up, what are you looking at this week? Jason Moser: Yeah, PayPal reported earnings, and it was a good quarter, nothing crazy one way or the other. We saw they exceeded guidance that leadership set a quarter ago. They raised guidance for the full year, saw revenue up 5% with earnings per share up 18% from a year ago. They saw transaction margin dollars grow 7%. Total payment volume grew 6%, and encouragingly, Venmo continues to gain traction. Revenue there was up 20% with total payment volume in the Venmo network up 12%. It's growing beyond peer to peer. They're developing more commerce relationships and users are using it more for things like shopping and transactions as opposed to just peer to peer money transfers. That's all very encouraging. It was a good quarter. Shares have had a tough year so far down something like 18% year to date, certainly underperforming the market while all the key performance indicators continue to trend in the right direction. With shares that around 14 times full year earnings projections today, it just seems like the market has taken a glass half empty view on this one. Travis Hoium: What about you, Lou? Lou Whiteman: I'm going to look at Howmet Aerospace. Ticker HWM. It's boring, but they make fasteners, other small parts, mostly for aircraft engines. They reported the classic beaten raise this week, really strong demand. Travel is holding up, and as we all know, Boeing has had some drama, so that's causing airlines to lean on their existing fleet more, that's creating huge demand for spare parts. Howmet is riding that wave, investing in its future, building out its manufacturing capacity. It's also aggressively reducing its share count. Cash stock is up 84% over the past year. Some of that was low hanging fruit. Some of that is just they went from being poorly managed to well managed. I don't think they can do another double in the next year, but this is a very well run company, and I think it's setting up to be a long term market beater. Travis Hoium: As I look at both of these, I can't get past the fact that PayPal is so cheap. This seems like one of these companies that just continues to perform well quarter after quarter. I don't love the products. I don't really use many of them, but they seem to have a really, really sticky business. If I get a pick out of those two, sorry, Lou, I'm going to go with PayPal. For Lou Whiteman and Jason Moser and our production leader today, Bart Shannon and the entire Motley Fool team, I'm Travis Hoium. Thank you for listening to Motley Fool Money. We'll see you here tomorrow. Jason Moser has positions in Alphabet, Amazon, Cloudflare, PayPal, Shopify, and The Trade Desk. Lou Whiteman has positions in Cloudflare, PayPal, Shopify, and The Trade Desk. Travis Hoium has positions in Alphabet, Cloudflare, PayPal, Shopify, and Walt Disney. The Motley Fool has positions in and recommends Alphabet, Amazon, Apple, Cloudflare, Meta Platforms, Microsoft, PayPal, Roku, Shopify, The Trade Desk, and Walt Disney. The Motley Fool recommends Howmet Aerospace and Warby Parker and recommends the following options: long January 2026 $395 calls on Microsoft, long January 2027 $42.50 calls on PayPal, short January 2026 $405 calls on Microsoft, and short September 2025 $77.50 calls on PayPal. The Motley Fool has a disclosure policy. The Fed's Inflation Conundrum & an AI Billionaire Battle Royale was originally published by The Motley Fool Se produjo un error al recuperar la información Inicia sesión para acceder a tu portafolio Se produjo un error al recuperar la información Se produjo un error al recuperar la información Se produjo un error al recuperar la información Se produjo un error al recuperar la información
Globe and Mail
06-08-2025
- Business
- Globe and Mail
Tariffs and Trade Wars Can't Slow Big Tech's Momentum
In this podcast, Motley Fool contributors Lou Whiteman, Rachel Warren, and Jon Quast discuss: The Federal Reserve's decision to keep rates steady. A shift in smartphone production. Microsoft and Meta Platforms commit to continued elevated capital expenditures. and commit to continued elevated capital expenditures. Who will be the next $4 trillion company? To catch full episodes of all The Motley Fool's free podcasts, check out our podcast center. When you're ready to invest, check out this top 10 list of stocks to buy. Where to invest $1,000 right now? Our analyst team just revealed what they believe are the 10 best stocks to buy right now. Learn More » A full transcript is below. Should you invest $1,000 in Meta Platforms right now? Before you buy stock in Meta Platforms, consider this: The Motley Fool Stock Advisor analyst team just identified what they believe are the 10 best stocks for investors to buy now… and Meta Platforms wasn't one of them. The 10 stocks that made the cut could produce monster returns in the coming years. Consider when Netflix made this list on December 17, 2004... if you invested $1,000 at the time of our recommendation, you'd have $619,036!* Or when Nvidia made this list on April 15, 2005... if you invested $1,000 at the time of our recommendation, you'd have $1,092,648!* Now, it's worth noting Stock Advisor's total average return is 1,026% — a market-crushing outperformance compared to 180% for the S&P 500. Don't miss out on the latest top 10 list, available when you join Stock Advisor. See the 10 stocks » *Stock Advisor returns as of August 4, 2025 This podcast was recorded on July 31, 2025. Rachel Warren: Tariffs and Trade wars can't slow big tech momentum. Motley Money starts now. I'm Rachel Warren, joined today by Motley Fool analysts Lou Whiteman and Jon Quast. Today, we're talking Mag 7 spending plans and tariff turmoil, but we have to start with the big macro picture first. We learned Wednesday that the US economy returned to growth in Q2. US gross domestic product, which is a measure of the value of goods and services produced across the economy, rose by 3% in the second quarter. That's up from a 0.5% contraction in the first quarter of the year, and it's actually ahead of the consensus estimate. We also saw that consumer spending rose by more than 1% in Q2. Now, this was as exports declined single digits, and imports fell by more than 30%, reversing a major surge that we saw in Q1 of 2025. Jon, the big takeaway for me is consumer spending seems to be holding up well even as businesses have turned cautious. But the question is, with all the headwinds the economy is facing, do you think that this can continue? Jon Quast: Yes, this can absolutely continue. Rachel, consumer spending can hold up. Now, listen, I could give you so many reasons on why to be skeptical on why the opposite is true. First and foremost, there's 1.2 trillion in credit card debt out there right now. That's up 30% in just the last three years. It would seem that consumers are spending, yes, but it also seems like they're spending on credit. So that's a party that the music is going to end, eventually, it would seem, and when that music ends, there could be a contraction to consumer spending. That said, I do say it can hold up because there's almost always a reason to be skeptical, and yet consumer spending almost always holds up. We will probably see shifts in consumer spending, and I think that is playing out. You take, for example, a company such as Kellanova. This is the company that was spun out from Kellogg's. It makes Pringles, Pop-Tarts. It reported financial results this morning on July 31, and it saw a softening of demand, and that is playing out for a variety of snacking companies right now. That's kind of a pervasive trend. People trending away from snacks. That's interesting. On the other hand, you have a company such as Carvana. They're selling 41% more cars in the most recent quarter compared to a year ago. There is this incredible shift of consumer spending, and it doesn't always make sense, from snacks to cars. But yeah, overall, I think that consumer spending can hold up. Lou Whiteman: Jon's right. You have to be crazy to bet against the American consumer. But you know what? I'm feeling a little crazy right now, Rachel. I'm more worried about the consumer right here than I'm business. I think businesses can snap back as the companies adjust to whatever the new normal is with tariffs. But heading into back-to-school and then the holiday season, I do think Main Street is going to feel the pushback of higher prices, maybe more so than tariffs have just been creeping in. My guess is, if GDP does continue to push higher in the second half, and I do think it'll push higher in the second half, I think it'll be a reverse at the second quarter with business, not the consumer doing the heavy lift. Rachel Warren: A healthy job market with low unemployment rates and rising wages. That's a primary driver of sustained consumer spending, and wage gains have been outpacing inflation. Consumers, in some cases have more disposable income to spend. Rising asset values can contribute to that wealth effect. and that can also make consumers feel more confident to spend. We've seen this dynamic where lower and middle-income consumers might be more vulnerable to economic shifts, but those in the top third of the income distribution area are thriving and account for a significant portion of spending. Now, it's worth noting the Federal Reserve left rates unchanged at its meeting on Wednesday. Now we know the Federal Reserve is likely to lower interest rates in September. You've got some economists predicting a further cut in December, according to recent reports. While the Fed held rates steady at their July meeting, the decision was not unanimous. There were two dissenting votes advocating for a rate cut. With tariff policy seemingly changing by the minute, it's hard to know what to expect. More on tariffs and big tech in a minute. You are listening to Motley Fool Money. Welcome back. We might not yet know the final tariff rates for various US trade partners, but we are beginning to see an impact from the aggressive moves. India has reportedly overtaken China to become the top source of smartphones sold in the US, and that's fueled by Apple's shift to assemble more phones in the country. Vietnam now ranks second, and China has fallen from first to year ago to third. Now, Lou, the White House wanted to move smartphone assembly out of China, but I don't think India was the destination it had in mind. Does Tim Cook have to worry about backlash from Washington, and what are your thoughts on the tariff Mayhem? Lou Whiteman: I think Tim Cook probably believes he can outlast the tariff push, and I think he's probably right. Look, this was the inevitable outcome of raising tariffs on China. There was never much of a chance that large corporations were just going to overnight shift manufacturing to the US. They'd have to build an entire supply chain, manufacturing footprint. There's just so much complexity, and they'd have to do it largely from scratch. It's just not going to happen. It didn't make sense for companies like Apple to do that. It made sense for them to lean into other markets where they are established. If tariffs do shift manufacturing back to the US, it'll take time. For now, the message from Washington, with all of this chaos has been things shift so fast, there's no reason for corporations to make any real massive CapEx moves. The chaos this week that just reinforces it, I think. The best move if you're a CEO is to roll with it and not make too many big company-altering decisions. That's what Apple's doing in India, and I think that makes sense. It's what honestly, they should be doing. Rachel Warren: We are now just hours away from the White House's August 1 deadline for countries to strike trade deals or face higher tariffs, and we've seen a flurry of activity, we appear to be in deals with Taiwan, Thailand, and Cambodia. The UK led the charge on trade agreements with the US. They struck one as early as May. Vietnam was the second to ink a deal with the Trump administration. President Trump announced a trade agreement on July 2nd that saw the tariff imposed on Vietnam slash from 46% to 20%. Japan was the second major Asian economy to come to an agreement with the US after China. They saw their tariff rate cut to 15%. They were also the first to see a lower preferential tariff rate for their key automobile sector. Now, the EU's agreement with the US was struck just days ago, and that was after lengthy negotiations. EU goods are now facing a 15% baseline tariff rate. South Korea is the latest country to reach an agreement as well on Thursday, with the terms being somewhat similar to the one Japan received. It's worth noting, though, the US has managed to make only about eight deals in 120 days. Some of our key trading partners remain without a deal so far. That includes Canada, Australia, and India. Jon, the situation is and will remain fluid. But as an investor, how closely are you watching all of this wheeling and dealing? Jon Quast: I'm not watching it closely at all, and I'll give you two reasons why. First of all, when I buy a stock, I have an investment thesis, and so this thesis is basically my reasoning for why the stock I bought is going to outperform the market average, and in my thesis, I try to conservatively account for risk, such as geopolitical risk. Like what we're talking about right here. If something can be broken, if my thesis can be broken based on changes in economic policy, I'm generally not that interested. I'm looking for something that doesn't really matter what these big changes in economic policy will be. The underlying trends for my thesis are still intact. I'll give you an example. Mercado Libre in South America. I've lived in South America. I can attest to how much paper money is still used in those economies, but that is changing so fast. Those economies are digitizing extremely fast, and Mercado Libre is a financial technology company. It's also an e-commerce company. You start looking at the pervasive trend that the economy is going digital, that's not going to change, and so I really see Mercado Libre being a long-term winner, regardless of what changes happen in the economic policy. Another reason I'm not really watching this closely is because even if there is a trade deal in place, even when something comes down, it seems like, and I believe this is fair to say, things in Washington these days are far from settled, and so if we get news today, that might change tomorrow. I really don't see a ton of value of following it too closely. I really think about Investing Great Charlie Munger. He said, "I figure that I want to swim as well as I can against the tides. I'm not trying to predict the tides". And I think it's a good rule to live by. Lou Whiteman: I think that's spot on. One of the advantages of being a long-term investor is, everything near-term is noise. I'm looking for companies that, whatever may come, can survive and thrive over the long term. I don't necessarily want to predict the weather. I just want to know that sometimes it's sunny, sometimes it rains, and I want companies that can do OK with both. I think that's exactly right, Jon. Rachel Warren: I think that's right, guys. Up next, we have Microsoft and Meta Earnings and their aggressive AI spending plans. We'll be back with you in a minute. You're listening to Motley Fool Money. Microsoft and Meta platforms were both out with earnings last night. Now, both companies posted double-digit growth that easily topped expectations, but the focus was on spending plans. Meta Platforms ' CFO, Susan Lee, said," We really believe that this is the time for us to make investments in AI," and that's really backing up the company's planned $85 billion in CapEx this year. Microsoft, for its part, said that they expect to spend 30 billion in the current quarter alone, which at an annualized rate would be even more than Meta or Alphabet is spending. Jon, the numbers here are almost mind-numbingly large. But the core businesses of these companies they are generating billions in cash, so they can afford the investment. Should investors be worried or excited about these spending plans? Jon Quast: I believe that investors should be absolutely thrilled, ecstatic with these plans. You're right. These numbers are mind-numbing. In fact, they're so big, we really can't even wrap our heads around them, 85 billion. Look, there are 500 companies in the S&P 500. With 85 billion, Meta could purchase any one of about 75% of these companies. These are the biggest, most profitable companies in the US, and they can buy most of them with 85 billion. That's a lot of money, and we're just talking about Meta with that. You start adding in Microsoft, Alphabet, all the mega caps, they're going to collectively spend about 320 billion this year in CapEx compared to 230 billion last year. That's nearly a 40% jump from last year. I think if you're a shareholder of any of these companies, it's basically good news because they need to invest in their futures at scale, and so it's going to cost a lot of money. But these companies have also made many shareholder-friendly moves in recent years, such as share buybacks and dividends, and so I feel like there's a good balance here. I think beyond that, though, investors need to think, Where is that 320 billion going to go? That's a lot of cash. I think companies such as NVIDIA and AMD are going to see ongoing, strong demand for their chips. I think even industrial players, such as HVAC and Electrical company Comfort System USA, they've got a rising backlog right now as they're trying to meet all this demand for the facilities being built to support AI. I think there's a lot to be excited about when you see how much money is getting thrown around. Rachel Warren: It's clear that Meta and Microsoft are increasing their investments in AI because they see it as a crucial driver for future growth and also to maintain their competitive advantage in various sectors. It's interesting because, of course, Meta's fallen a bit behind the competition here the last few years. But then you have its recent launch if it's Meta super-intelligence labs, their hiring spree that they've been on in a bid to catch up in the AI race. It's getting a lot of attention from investors. Lou, what are your thoughts on what we're seeing? Lou Whiteman: To me, Microsoft has the most clear use case for AI outside of just refining its own business or internal work. Alphabet and Meta are mostly deploying AI for internal uses. Alphabet is hoping to use AI to reinvent search, but it's early days there. But Microsoft, thanks to 365, thanks to Office, all these massive businesses they have a clear lane to the corporate user to deploy AI. It may not be a sustainable advantage. There could be a way to catch up, but I think it's a real advantage right now over these just cloud players. I think we're going to see companies with those strong B2B connections, like Microsoft, like Salesforce, even Oracle. I think they're going to lead the way on deploying AI to the workforce, this next step that is really showing the payoff and all this investment. Rachel Warren: Investors pushed Microsoft higher following earnings. The company joined in NVIDIA as the second member of the $4 trillion market cap club. Time for a bold prediction, guys. What will be the next company to break the $4 trillion market cap threshold, Jon? Tell us. Jon Quast: Rachel, this might be a little bit of a surprise, but I think that Alphabet is the best position to make a run at a $4 trillion market cap. When you look at the valuations of the mega cap companies, for me, Alphabet is the one that makes the most sense. It does seem like it has a fair valuation right now. But when it comes to its financial position, competitive strengths, opportunities, it's as good as any of them, if not better than others. I think the only risk here is that it gets broken up. But honestly, any company making a run at four trillion has to be worried about being broken up at some point. Lou Whiteman: I hate to go into Alphabet here because I think you're probably right, but I'll take the Dark Horse. Meta is currently sixth on the list. It isn't even quite two trillion yet, but look, that advertising business is a powerhouse, and I don't see another business like it elsewhere with less headwinds up ahead than I think Alphabet and some of the others. I'll take Meta, though I'll be honest, I don't think any of these guys get there in the near term, so it could be a long race. Rachel Warren: It is certainly an exciting time to be a tech investor and to be investing in the world of AI. So many opportunities there. As always, people on the program may have interests in the stocks they talk about, and the Motley Fool may have formal recommendations for or against. So don't buy or sell stocks based solely on what you hear. All personal finance content follows Motley Fool editorial standards and is not approved by advertisers. Advertisements are sponsored content and provided for informational purposes only. To see our full advertising disclosure, please check out our show notes. Lou Witman and Jon Quast, as well as our man behind the glass, Bart Shannon, and the entire Motley Fool Money team, I'm Rachel Warren. Thanks for listening. We'll see you tomorrow. Jon Quast has positions in MercadoLibre. Lou Whiteman has positions in MercadoLibre. Rachel Warren has positions in Alphabet and Apple. The Motley Fool has positions in and recommends Advanced Micro Devices, Alphabet, Apple, MercadoLibre, Meta Platforms, Microsoft, Nvidia, Oracle, and Salesforce. The Motley Fool recommends WK Kellogg and recommends the following options: long January 2026 $395 calls on Microsoft and short January 2026 $405 calls on Microsoft. The Motley Fool has a disclosure policy.
Yahoo
06-08-2025
- Business
- Yahoo
Tariffs and Trade Wars Can't Slow Big Tech's Momentum
In this podcast, Motley Fool contributors Lou Whiteman, Rachel Warren, and Jon Quast discuss: The Federal Reserve's decision to keep rates steady. A shift in smartphone production. Microsoft and Meta Platforms commit to continued elevated capital expenditures. Who will be the next $4 trillion company? To catch full episodes of all The Motley Fool's free podcasts, check out our podcast center. When you're ready to invest, check out this top 10 list of stocks to buy. A full transcript is below. Should you invest $1,000 in Meta Platforms right now? Before you buy stock in Meta Platforms, consider this: The Motley Fool Stock Advisor analyst team just identified what they believe are the for investors to buy now… and Meta Platforms wasn't one of them. The 10 stocks that made the cut could produce monster returns in the coming years. Consider when Netflix made this list on December 17, 2004... if you invested $1,000 at the time of our recommendation, you'd have $619,036!* Or when Nvidia made this list on April 15, 2005... if you invested $1,000 at the time of our recommendation, you'd have $1,092,648!* Now, it's worth noting Stock Advisor's total average return is 1,026% — a market-crushing outperformance compared to 180% for the S&P 500. Don't miss out on the latest top 10 list, available when you join Stock Advisor. See the 10 stocks » *Stock Advisor returns as of August 4, 2025 This podcast was recorded on July 31, 2025. Rachel Warren: Tariffs and Trade wars can't slow big tech momentum. Motley Money starts now. I'm Rachel Warren, joined today by Motley Fool analysts Lou Whiteman and Jon Quast. Today, we're talking Mag 7 spending plans and tariff turmoil, but we have to start with the big macro picture first. We learned Wednesday that the US economy returned to growth in Q2. US gross domestic product, which is a measure of the value of goods and services produced across the economy, rose by 3% in the second quarter. That's up from a 0.5% contraction in the first quarter of the year, and it's actually ahead of the consensus estimate. We also saw that consumer spending rose by more than 1% in Q2. Now, this was as exports declined single digits, and imports fell by more than 30%, reversing a major surge that we saw in Q1 of 2025. Jon, the big takeaway for me is consumer spending seems to be holding up well even as businesses have turned cautious. But the question is, with all the headwinds the economy is facing, do you think that this can continue? Jon Quast: Yes, this can absolutely continue. Rachel, consumer spending can hold up. Now, listen, I could give you so many reasons on why to be skeptical on why the opposite is true. First and foremost, there's 1.2 trillion in credit card debt out there right now. That's up 30% in just the last three years. It would seem that consumers are spending, yes, but it also seems like they're spending on credit. So that's a party that the music is going to end, eventually, it would seem, and when that music ends, there could be a contraction to consumer spending. That said, I do say it can hold up because there's almost always a reason to be skeptical, and yet consumer spending almost always holds up. We will probably see shifts in consumer spending, and I think that is playing out. You take, for example, a company such as Kellanova. This is the company that was spun out from Kellogg's. It makes Pringles, Pop-Tarts. It reported financial results this morning on July 31, and it saw a softening of demand, and that is playing out for a variety of snacking companies right now. That's kind of a pervasive trend. People trending away from snacks. That's interesting. On the other hand, you have a company such as Carvana. They're selling 41% more cars in the most recent quarter compared to a year ago. There is this incredible shift of consumer spending, and it doesn't always make sense, from snacks to cars. But yeah, overall, I think that consumer spending can hold up. Lou Whiteman: Jon's right. You have to be crazy to bet against the American consumer. But you know what? I'm feeling a little crazy right now, Rachel. I'm more worried about the consumer right here than I'm business. I think businesses can snap back as the companies adjust to whatever the new normal is with tariffs. But heading into back-to-school and then the holiday season, I do think Main Street is going to feel the pushback of higher prices, maybe more so than tariffs have just been creeping in. My guess is, if GDP does continue to push higher in the second half, and I do think it'll push higher in the second half, I think it'll be a reverse at the second quarter with business, not the consumer doing the heavy lift. Rachel Warren: A healthy job market with low unemployment rates and rising wages. That's a primary driver of sustained consumer spending, and wage gains have been outpacing inflation. Consumers, in some cases have more disposable income to spend. Rising asset values can contribute to that wealth effect. and that can also make consumers feel more confident to spend. We've seen this dynamic where lower and middle-income consumers might be more vulnerable to economic shifts, but those in the top third of the income distribution area are thriving and account for a significant portion of spending. Now, it's worth noting the Federal Reserve left rates unchanged at its meeting on Wednesday. Now we know the Federal Reserve is likely to lower interest rates in September. You've got some economists predicting a further cut in December, according to recent reports. While the Fed held rates steady at their July meeting, the decision was not unanimous. There were two dissenting votes advocating for a rate cut. With tariff policy seemingly changing by the minute, it's hard to know what to expect. More on tariffs and big tech in a minute. You are listening to Motley Fool Money. Welcome back. We might not yet know the final tariff rates for various US trade partners, but we are beginning to see an impact from the aggressive moves. India has reportedly overtaken China to become the top source of smartphones sold in the US, and that's fueled by Apple's shift to assemble more phones in the country. Vietnam now ranks second, and China has fallen from first to year ago to third. Now, Lou, the White House wanted to move smartphone assembly out of China, but I don't think India was the destination it had in mind. Does Tim Cook have to worry about backlash from Washington, and what are your thoughts on the tariff Mayhem? Lou Whiteman: I think Tim Cook probably believes he can outlast the tariff push, and I think he's probably right. Look, this was the inevitable outcome of raising tariffs on China. There was never much of a chance that large corporations were just going to overnight shift manufacturing to the US. They'd have to build an entire supply chain, manufacturing footprint. There's just so much complexity, and they'd have to do it largely from scratch. It's just not going to happen. It didn't make sense for companies like Apple to do that. It made sense for them to lean into other markets where they are established. If tariffs do shift manufacturing back to the US, it'll take time. For now, the message from Washington, with all of this chaos has been things shift so fast, there's no reason for corporations to make any real massive CapEx moves. The chaos this week that just reinforces it, I think. The best move if you're a CEO is to roll with it and not make too many big company-altering decisions. That's what Apple's doing in India, and I think that makes sense. It's what honestly, they should be doing. Rachel Warren: We are now just hours away from the White House's August 1 deadline for countries to strike trade deals or face higher tariffs, and we've seen a flurry of activity, we appear to be in deals with Taiwan, Thailand, and Cambodia. The UK led the charge on trade agreements with the US. They struck one as early as May. Vietnam was the second to ink a deal with the Trump administration. President Trump announced a trade agreement on July 2nd that saw the tariff imposed on Vietnam slash from 46% to 20%. Japan was the second major Asian economy to come to an agreement with the US after China. They saw their tariff rate cut to 15%. They were also the first to see a lower preferential tariff rate for their key automobile sector. Now, the EU's agreement with the US was struck just days ago, and that was after lengthy negotiations. EU goods are now facing a 15% baseline tariff rate. South Korea is the latest country to reach an agreement as well on Thursday, with the terms being somewhat similar to the one Japan received. It's worth noting, though, the US has managed to make only about eight deals in 120 days. Some of our key trading partners remain without a deal so far. That includes Canada, Australia, and India. Jon, the situation is and will remain fluid. But as an investor, how closely are you watching all of this wheeling and dealing? Jon Quast: I'm not watching it closely at all, and I'll give you two reasons why. First of all, when I buy a stock, I have an investment thesis, and so this thesis is basically my reasoning for why the stock I bought is going to outperform the market average, and in my thesis, I try to conservatively account for risk, such as geopolitical risk. Like what we're talking about right here. If something can be broken, if my thesis can be broken based on changes in economic policy, I'm generally not that interested. I'm looking for something that doesn't really matter what these big changes in economic policy will be. The underlying trends for my thesis are still intact. I'll give you an example. Mercado Libre in South America. I've lived in South America. I can attest to how much paper money is still used in those economies, but that is changing so fast. Those economies are digitizing extremely fast, and Mercado Libre is a financial technology company. It's also an e-commerce company. You start looking at the pervasive trend that the economy is going digital, that's not going to change, and so I really see Mercado Libre being a long-term winner, regardless of what changes happen in the economic policy. Another reason I'm not really watching this closely is because even if there is a trade deal in place, even when something comes down, it seems like, and I believe this is fair to say, things in Washington these days are far from settled, and so if we get news today, that might change tomorrow. I really don't see a ton of value of following it too closely. I really think about Investing Great Charlie Munger. He said, "I figure that I want to swim as well as I can against the tides. I'm not trying to predict the tides". And I think it's a good rule to live by. Lou Whiteman: I think that's spot on. One of the advantages of being a long-term investor is, everything near-term is noise. I'm looking for companies that, whatever may come, can survive and thrive over the long term. I don't necessarily want to predict the weather. I just want to know that sometimes it's sunny, sometimes it rains, and I want companies that can do OK with both. I think that's exactly right, Jon. Rachel Warren: I think that's right, guys. Up next, we have Microsoft and Meta Earnings and their aggressive AI spending plans. We'll be back with you in a minute. You're listening to Motley Fool Money. Microsoft and Meta platforms were both out with earnings last night. Now, both companies posted double-digit growth that easily topped expectations, but the focus was on spending plans. Meta Platforms ' CFO, Susan Lee, said," We really believe that this is the time for us to make investments in AI," and that's really backing up the company's planned $85 billion in CapEx this year. Microsoft, for its part, said that they expect to spend 30 billion in the current quarter alone, which at an annualized rate would be even more than Meta or Alphabet is spending. Jon, the numbers here are almost mind-numbingly large. But the core businesses of these companies they are generating billions in cash, so they can afford the investment. Should investors be worried or excited about these spending plans? Jon Quast: I believe that investors should be absolutely thrilled, ecstatic with these plans. You're right. These numbers are mind-numbing. In fact, they're so big, we really can't even wrap our heads around them, 85 billion. Look, there are 500 companies in the S&P 500. With 85 billion, Meta could purchase any one of about 75% of these companies. These are the biggest, most profitable companies in the US, and they can buy most of them with 85 billion. That's a lot of money, and we're just talking about Meta with that. You start adding in Microsoft, Alphabet, all the mega caps, they're going to collectively spend about 320 billion this year in CapEx compared to 230 billion last year. That's nearly a 40% jump from last year. I think if you're a shareholder of any of these companies, it's basically good news because they need to invest in their futures at scale, and so it's going to cost a lot of money. But these companies have also made many shareholder-friendly moves in recent years, such as share buybacks and dividends, and so I feel like there's a good balance here. I think beyond that, though, investors need to think, Where is that 320 billion going to go? That's a lot of cash. I think companies such as NVIDIA and AMD are going to see ongoing, strong demand for their chips. I think even industrial players, such as HVAC and Electrical company Comfort System USA, they've got a rising backlog right now as they're trying to meet all this demand for the facilities being built to support AI. I think there's a lot to be excited about when you see how much money is getting thrown around. Rachel Warren: It's clear that Meta and Microsoft are increasing their investments in AI because they see it as a crucial driver for future growth and also to maintain their competitive advantage in various sectors. It's interesting because, of course, Meta's fallen a bit behind the competition here the last few years. But then you have its recent launch if it's Meta super-intelligence labs, their hiring spree that they've been on in a bid to catch up in the AI race. It's getting a lot of attention from investors. Lou, what are your thoughts on what we're seeing? Lou Whiteman: To me, Microsoft has the most clear use case for AI outside of just refining its own business or internal work. Alphabet and Meta are mostly deploying AI for internal uses. Alphabet is hoping to use AI to reinvent search, but it's early days there. But Microsoft, thanks to 365, thanks to Office, all these massive businesses they have a clear lane to the corporate user to deploy AI. It may not be a sustainable advantage. There could be a way to catch up, but I think it's a real advantage right now over these just cloud players. I think we're going to see companies with those strong B2B connections, like Microsoft, like Salesforce, even Oracle. I think they're going to lead the way on deploying AI to the workforce, this next step that is really showing the payoff and all this investment. Rachel Warren: Investors pushed Microsoft higher following earnings. The company joined in NVIDIA as the second member of the $4 trillion market cap club. Time for a bold prediction, guys. What will be the next company to break the $4 trillion market cap threshold, Jon? Tell us. Jon Quast: Rachel, this might be a little bit of a surprise, but I think that Alphabet is the best position to make a run at a $4 trillion market cap. When you look at the valuations of the mega cap companies, for me, Alphabet is the one that makes the most sense. It does seem like it has a fair valuation right now. But when it comes to its financial position, competitive strengths, opportunities, it's as good as any of them, if not better than others. I think the only risk here is that it gets broken up. But honestly, any company making a run at four trillion has to be worried about being broken up at some point. Lou Whiteman: I hate to go into Alphabet here because I think you're probably right, but I'll take the Dark Horse. Meta is currently sixth on the list. It isn't even quite two trillion yet, but look, that advertising business is a powerhouse, and I don't see another business like it elsewhere with less headwinds up ahead than I think Alphabet and some of the others. I'll take Meta, though I'll be honest, I don't think any of these guys get there in the near term, so it could be a long race. Rachel Warren: It is certainly an exciting time to be a tech investor and to be investing in the world of AI. So many opportunities there. As always, people on the program may have interests in the stocks they talk about, and the Motley Fool may have formal recommendations for or against. So don't buy or sell stocks based solely on what you hear. All personal finance content follows Motley Fool editorial standards and is not approved by advertisers. Advertisements are sponsored content and provided for informational purposes only. To see our full advertising disclosure, please check out our show notes. Lou Witman and Jon Quast, as well as our man behind the glass, Bart Shannon, and the entire Motley Fool Money team, I'm Rachel Warren. Thanks for listening. We'll see you tomorrow. Jon Quast has positions in MercadoLibre. Lou Whiteman has positions in MercadoLibre. Rachel Warren has positions in Alphabet and Apple. The Motley Fool has positions in and recommends Advanced Micro Devices, Alphabet, Apple, MercadoLibre, Meta Platforms, Microsoft, Nvidia, Oracle, and Salesforce. The Motley Fool recommends WK Kellogg and recommends the following options: long January 2026 $395 calls on Microsoft and short January 2026 $405 calls on Microsoft. The Motley Fool has a disclosure policy. Tariffs and Trade Wars Can't Slow Big Tech's Momentum was originally published by The Motley Fool Sign in to access your portfolio
Yahoo
29-07-2025
- Business
- Yahoo
Why UPS Stock Is Down Big Today
Key Points UPS reported mixed results, with revenue falling year over year but topping expectations. The company's earnings momentum has been slowed by the impact of trade uncertainty. This should be a long-term winner, but it is hard to see things turning around quickly. 10 stocks we like better than United Parcel Service › United Parcel Service (NYSE: UPS) missed earnings expectations and provided no full-year guidance due to ongoing macro uncertainty. Investors are racing for the exits, sending UPS shares down 10% as of 11 a.m. ET. Trade wars take their toll It has been a difficult few years for transportation companies. In 2024, fears about a slowing economy and higher interest rates caused large shippers to trim inventory levels, leading to less demand. The new year brought new uncertainty as tariffs and trade wars disrupted normal shipping patterns. UPS sees no end in sight. The company earned $1.55 per share in the quarter, missing the $1.57-per-share consensus and declining from $1.79 per share a year ago. Revenue came in at $21.2 billion, down 3% year over year but slightly ahead of expectations. CEO Carol Tome in a statement said the company continues to operate in "a dynamic and evolving trade environment." The company provided no full-year revenue or operating profit guidance but did say it expects about $3.5 billion in capital expenditures and $1 billion in share repurchases. The share repurchases for the year have already been completed. Is UPS a buy? UPS is now off 26% year to date. The company is an essential cog in the global transportation network and should rebound eventually as trade flows eventually normalize. The question is when that will happen. So far in 2025, betting on a recovery has been a losing proposition, and with UPS not even offering guidance, it appears management sees no end in sight. Investors buying in now get a 7% dividend yield, but they will likely need a lot of patience as the macro situation plays out. Should you invest $1,000 in United Parcel Service right now? Before you buy stock in United Parcel Service, consider this: The Motley Fool Stock Advisor analyst team just identified what they believe are the for investors to buy now… and United Parcel Service wasn't one of them. The 10 stocks that made the cut could produce monster returns in the coming years. Consider when Netflix made this list on December 17, 2004... if you invested $1,000 at the time of our recommendation, you'd have $633,452!* Or when Nvidia made this list on April 15, 2005... if you invested $1,000 at the time of our recommendation, you'd have $1,083,392!* Now, it's worth noting Stock Advisor's total average return is 1,046% — a market-crushing outperformance compared to 183% for the S&P 500. Don't miss out on the latest top 10 list, available when you join Stock Advisor. See the 10 stocks » *Stock Advisor returns as of July 29, 2025 Lou Whiteman has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends United Parcel Service. The Motley Fool has a disclosure policy. Why UPS Stock Is Down Big Today was originally published by The Motley Fool Error in retrieving data Sign in to access your portfolio Error in retrieving data Error in retrieving data Error in retrieving data Error in retrieving data
