News and analysis

The success of Google earnings and the market's immediate response surprised even me, the most involved enthusiast of holding more Google shares in investment portfolio. Shares of Google-parent Alphabet (GOOG), which had already gained 14% since the beginning of the month on hot expectations, soared another 9% in extended trading hours on the night of October 30, nearly touching the $300 mark in pre-market trading. And they don't seem ready to slow down here for long. Perhaps a slight short-lived pullback could emerge, nothing above that.

The major reason behind this was that Google actually reported double-digit growth in every major business, beating preliminary expert estimates by far. Google's diluted EPS (earnings per share) was $2.87 vs much lower average forecast of $2.29, it's fantastic! The search engine-based plus cloud-related business together showed the first-ever quarter surpassing $100 billion in total sales. The so-called top-line number added 16% YoY to hit its record $102.35 billion vs average estimates of just $99.79 billion and against the giant's previous record achievement of $96.47 in Q4 2024. Purely search revenues rose 15% to $56.57 billion. The quarterly cloud-computing contribution surged 34% to $15.16 billion. Ad revenues from YouTube video platform gained 15% to $10.26 billion. Alphabet also said total ad sales are $74.18 billion in the quarter, up 13% YoY, with traffic acquisition costs rising modestly to $14.88 billion. Paid subscriptions, mostly consisting of cloud storage services and YouTube’s ad-free premiums, exceeded 300 million accounts. If these numbers are not enough for you, then the firm's capex (capital expenditures) increased to just under $24 billion during the period for ramping AI data centers and hardware. This will help to monetize AI technologies even better.

Despite headwinds like competitive steps by ChatGPT-maker OpenAI, which just launched its own browser, “our full stack approach to AI is delivering strong momentum... including the global rollout of AI Overviews and AI Mode in Search in record time,” said CEO Sundar Pichai. I have no words to add to these if I would like to justify why Google stock is in my personal top 5 picks to hold for the coming months.

Fresh megacaps records are breath-taking as those flowers are just entering into full bloom. The AI-darling Nvidia has to rise to the challenges of Sino-American affairs' adapting to new technologies. However, its share price soared to new all-time peaks when closing the day at as high as $207.04 for the first time ever, up another 2.99% in one session. The stock even traded above $212 at some point before pulling back. Nvidia's rocket took off immediately when the U.S. president Donald Trump mentioned cutting-edge Blackwell chip shipment with Chinese leader Xi Jinping. This step up made Nvidia the first $5 trillion company in the world.

Along with a 7.5% jump on solid quarterly earnings in Google-parent Alphabet (GOOG), which is now a measly $5 shy of $300 per unit, these both improvements pushed the S&P 500 broad barometer to a new historic high of 2,922.13 points in Asian hours today. The Federal Reserve's 0.25% rate cut on Wednesday seems to have been lost amid those more important market drivers.

While Beijing is under-buying U.S. agricultural goods and hampering the expansion of U.S. social media, to say nothing of non-interfering with local businesses from copying know-hows, the Washington White House is responding in kind, refusing to share the latest technological developments of its flagships and setting trade levies. Mr Trump had previously signalled that he might consider allowing Nvidia to export a downgraded version of its latest AI processor. Trump described the Blackwell chip as “super duper” noting that Nvidia CEO Jensen Huang recently brought a version of the accelerator to the Oval Office. “We’ll be speaking about Blackwells,” he has told reporters.

Restrictions on U.S. chip exports to China is the main hurdle for the worldwide triumphal march of generative artificial intelligence, along with still limited capacity of AI consuming companies to turn the use of all these talking chatbots, viral images from neural networks, and business optimization systems into concrete profits. Jensen Huang projected Nvidia will generate $500 billion in GPU sales through 2026. Nvidia announced its work with Uber to develop self-driving vehicles and with Eli Lilly to accelerate drug discovery using 1,000 of its GPUs and tie-ups with Nokia to advance 6G technology. Other AI collaborations were made with Amazon, Foxconn, Caterpillar, Palantir, Oracle, Cisco and T-Mobile. According to Vivek Arya at the Bank of America, the next financial year of 2025/26 is backed by $0.5 trillion+ in orders at conservative price of $25 billion per gigawatt vs. potential for $30 billion+ content, he wrote when justifying his personal price target for Nvidia at $275 per share.

Nothing can stop Microsoft from its rally. The Windows-maker's price briefly hit $555 at the end of July and then the bubbling stream has been allowed to off-gas for a couple of months staying at over $500 per share while tariff storms raged. This was exactly what has allowed the stock to raise growing investment flows for a triumphant return above $550 as soon as a suitable fundamental opportunity presented itself. The last 4% was covered quickly, within a trading gap on Tuesday, thanks to a new agreement announced with ChatGPT developer OpenAI. According to the news, OpenAI is going to grant Microsoft a $135 billion stake. In exchange for this, OpenAI declared its commitment to purchasing an extra $250 billion in Microsoft's Azure cloud services, even though Microsoft will no longer have first refusal rights as OpenAI’s compute provider.

This partnership is on the verge of controlling power but it does not violate antitrust laws. It began in 2019, with Microsoft now holding 27% ownership in OpenAI. Now it has tremendously expanded after months of negotiations allowing both companies necessary flexibility. OpenAI can jointly develop cutting-edge software like Sora with any third parties, also providing API access to national security customers, regardless of cloud provider. Microsoft will have the right to work independently on AGI (artificial general intelligence) development, alone or with other partners. The software giant keeps extended intellectual property rights through 2032, including rights on models developed after AGI is achieved, with appropriate safety measures in place.

No one, including me, can foresee all the far-reaching consequences of this deal. Besides, it's funny to watch how those kind of deals between AI giants like OpenAI and NVIDIA, then NVIDIA and Oracle, now OpenAI and Microsoft etc. allow each other to enhance their market positioning against many smaller or non-AI businesses, with their actual revenue and profit growth is still nowhere near what each of those companies has projected. Anyway, a $10 to $15 share price pullback could not mislead mid-term investors like me about obvious plans of major financial houses to acquire even larger stakes in Microsoft. The behemoth company's incoming quarterly report could only further spur this investment process, increasing Microsoft's market cap targets by another double-digit percentage number. It seems they will consolidate their leadership in the competitive cloud environment, previously confirmed by phenomenal results in Q2. Perhaps $600 per share is the minimum threshold that I keep in my mind for the next wave's foam to touch it. Further growth to $625 or so may be delayed, as it similarly happened immediately after the summer's spontaneous jump well above $550, but extended rally well above $600 still looks inevitable.

My dear friends, earlier in mid-September I told you that taking profits in growing Tesla stock without much delay was the best possible decision after its rapid upsurge. Rising in prices by more than $70 per share in only 3 trading days looked excessive. So, in the main thing, I was right, even though the major wave of mass profit taking came above $470, i.e. some higher and two weeks later. But here and now the recent market moves have changed my point of view for Tesla stock. It happily blew off enough steam already so that the crowd became eager and ready to continue on the EV maker's upside rally, having bought yesterday immediately as soon as the price touched below $415 on quarterly earnings' initially volatile interpretation. From this bottom, with losses of up to 5.5% at the point, the stock just switched into a relentless upside momentum, turning the loss into a 2.28% daily gain. It was just 0.60 cents short of touching $450, which comprehensively demonstrates currently enthusiastic market sentiment. I suggest that buying any dips close to $425 or maybe $420 would be a generous gift, as it seems that retesting $480 and then climbing to at least $525 per Tesla share is only a matter of two or three months if not just weeks.

In addition to Tesla sales exceeding Q2 by almost $2 billion with a new record of $28.1 billion, a powerful jump in EPS (equity per share) came out, being one and a half times higher from $0.33 in Q2 to $0.50 in Q3. Only very strange people could have fallen for the idea that this is a small number compared to the average expert forecast of $0.54 to start selling on it. For me, that $0.54 expert stuff just fell from the sky to create some blur around the truth that Tesla numbers were as hard as diamonds. The volume of electric vehicle shipments increased by 7% to 497,098 units compared to the same period last year. This can be partially attributed, of course, to US extra demand before the expiration of the tax credit discount of $7,500 at the end of September, but sales statistics have grown globally more or less evenly. And then there are robotaxi service expansion, the humanoid robot industry and huge battery charging network. With all this, Tesla will be ahead of its rivals, even if we take into account its higher-than-it-was-expected prices for affordable cars. I never said Tesla had fundamental weaknesses. Nothing of the sort. I only warned about the asset being momentarily overbought. That's no longer the case.