Good morning, traders…
Ben here.
Earnings season always has a few surprises in store, but this quarter has been something else…
Companies are putting up strong numbers — earnings beats, revenue growth, solid guidance — and yet, stocks are getting sold off left and right.
It’s the kind of market action that reminds me why I usually don’t trade earnings directly. Too much randomness, especially when the VIX and SKEW are elevated.
But there’s one major takeaway from all the reports so far — a certain tech giant making a massive commitment to the future.
The ripple effect of this decision was already visible yesterday, and if the trend holds, it could be a turning point for one of the most talked-about sectors in the market.
Some stocks are down big despite posting great results, while others are quietly bouncing back after ugly sell-offs.
Meanwhile, tradeable patterns are emerging beneath the noise, and spotting them could make all the difference in the days ahead.
With that in mind, let me show you what we’ve learned from earnings season so far (and how to trade accordingly)…
The Theme of This Earnings Season
We’re deep into earnings season, and the theme is clear: Double beats (earnings and revenue) aren’t enough.
That being said, some patterns are showing up. Alphabet Inc. (NASDAQ: GOOGL) revealed something huge: CapEx is surging.
They’re ramping up spending to $75 billion for 2025, up from an estimated $58 billion. That’s not a small difference. And guess who benefits? Nvidia Corporation (NASDAQ: NVDA), Broadcom Inc. (NASDAQ: AVGO), and other chip names.
That’s why NVDA was up more than 4% yesterday. The DeepSeek-fueled AI pullback from last week is starting to look like a blip on the radar.
Key Takeaways from 6 Recent Earnings Results
- Alphabet Inc. (NASDAQ: GOOGL): Earnings were solid, but it’s the CapEx increase that stole the show. They’re betting big on AI, and that means money flowing into Nvidia, AMD, Broadcom, and other chip suppliers.
- Nvidia Corporation (NASDAQ: NVDA): This move pre-market is almost entirely due to Google’s spending plans. If Nvidia holds strong today, we could see a run-up into its earnings later this month.
- Uber Technologies, Inc. (NYSE: UBER): Earnings were actually great, but the stock is down because of weak Q1 guidance. Why? Because Q4 included the holiday season, and Q1 is always softer. This isn’t some shocking revelation. I think the market is overreacting — and this stock is undervalued.
- Advanced Micro Devices, Inc. (NASDAQ: AMD): Strong earnings, but they got dragged down by some weaker segments. In the long term, the company is looking okay, but short term, the chart just can’t seem to break its multi-month downtrend.
- PayPal Holdings, Inc. (NASDAQ: PYPL): They’re buying back shares like crazy — another $15 billion announced. EPS won’t miss for a long time. But right now, no one seems to care. Stock is still struggling.
- The Walt Disney Company (NYSE: DIS): Solid numbers considering how much they have going on. Parks, streaming, ESPN — it’s a tough company to analyze in one shot. But the stock was recovering yesterday.
CapEx: The Money Has To Go Somewhere…
If you’re wondering why Nvidia was so strong yesterday, look no further than Google and Meta’s commentary about CapEx.
Google announced spending increases from $58 billion to $75 billion, while META reiterated its plans to spend $65 billion this year.
That money has to go somewhere, and AI chipmakers are the biggest beneficiaries…
Some things to watch this week:
- If Nvidia keeps pushing up, other semiconductor names should follow.
- Super Micro Computer, Inc. (NASDAQ: SMCI) is another AI play that’s been catching serious bids.
- Apple and Google are dragging tech down, but that could be short-lived.
In the big picture, the AI trade is far from over. Last week’s DeepSeek concerns seem to be fading fast, and this week could be a key turning point.
The reaction to earnings has been harsh across the board, but that just means we need to wait for things to settle before jumping in.
Patience is key in this market.
Before we go, let’s look at:
💰The Biggest Smart Money Bets of the Day💰
- $8.5 million bullish bet on GLD 03/14/2025 $270 calls @ $3.45 avg. (seen on 2/5)
- $4 million bullish bet on FXI 06/20/2025 $33 calls @ $2.03 avg. (seen on 2/5)
- $2.4 million bullish bet on UPST 02/21/2025 $75 calls @ $3.45 avg. (seen on 2/5)
Happy trading,
Ben Sturgill
P.S. Speaking of earnings season…
We’ve had 100 winning trades in a row* in Earnings Edge — don’t miss the next 100.
*Past performance does not indicate future results
