Tech
The stock market moved higher since our last CNBC Investing Club Monthly Meeting as the artificial intelligence trade came roaring back. The tech-heavy Nasdaq led the way, climbing 2.7% over the period. The S & P 500 gained 2.6%, while the Dow Jones Industrial Average advanced 2.3%. The gains came despite plenty of volatility beneath the surface, including the forced unwinding of Situational Awareness, a highly leveraged AI-focused hedge fund that briefly pressured some of the market’s biggest winners. On Thursday, the market pushed higher yet again. Honeywell Aerospace would have been our worst-performing stock in the portfolio, down 19.5% since our last monthly meeting. However, we exited our position last week after management lowered guidance in its first standalone earnings report, citing ongoing supply chain execution issues. This weakened our conviction in the stock as our original thesis centered on a clean execution following the spin-off. We still own Honeywell Technologies . Ahead of our August Monthly Meeting livestream , which starts at noon ET, here’s a look at what moved our three top and bottom performers since our last meeting. Top performers Microsoft up 22.8% Microsoft ‘s quarterly results marked a dramatic reversal in sentiment by showing investors what successful AI spending looks like. After the bell on July 29, the cloud and software giant delivered strong growth while keeping its capital spending outlook relatively disciplined and generating $19 billion in free cash flow. That combination gave investors greater confidence that Microsoft’s massive AI investments are translating into meaningful returns. “Microsoft has gone from most hated to most loved,” Jim said after the report , urging investors to “stay long. Do not touch it.” Eaton up 16.1% The electrical equipment supplier rebounded sharply after posting a strong quarter. Eaton beat both top and bottom line expectations and raised its full-year organic growth and earnings outlook, while orders and backlog surged across its electrical businesses. The results, which came out the morning of July 31, arrived at an important time after forced selling tied to the Situational Awareness unwind had dragged down AI infrastructure stocks. Jim called the hedge fund blow-up a ” clearing event ,” and Eaton’s quarter gave investors another reason to return to the group. We continue to like Eaton as a picks-and-shovels play on the data center buildout, giving us AI exposure without having to bet directly on the technology itself. Salesforce up 12% The software company rallied as investors warmed back up to software after spending much of the first half of the year worried that AI would disrupt traditional software-as-a-service (SaaS) business models. After initially falling following ServiceNow’s July 22 earnings, Salesforce rebounded as the Situational Awareness implosion accelerated the rotation out of semiconductors and into beaten-down enterprise software stocks. Strong results from Microsoft and Palantir added fuel to the comeback. Salesforce remains a show-me story, but the rally demonstrates how quickly sentiment can change once expectations get low enough for good news to matter. Bottom performers Linde down 7.9% The industrial gas giant fell sharply after its second-quarter earnings report, which came out before the bell on July 31. That decline came despite beats on both earnings and revenue. Investors focused instead on lighter-than-expected guidance and problems in Linde’s healthcare business, where higher labor costs and insurance reimbursement changes weighed on margins. While this wasn’t the cleanest quarter that Linde has reported in our five years owning the stock, we viewed the post-earnings sell-off as a buying opportunity rather than a change in the long-term story. “You buy the stock,” Jim said. “It’s one of the greatest stories of our time. It is.” Apple down 9.3% The iPhone maker had been holding up well until earnings sent shares lower. Apple beat Wall Street’s revenue and profit expectations, with quarterly results out the evening of July 30. However, higher memory costs, supply constraints, and softer guidance overshadowed the good . The company has already raised prices on some Macs and iPads to offset surging memory costs. Still, Apple has largely avoided the AI infrastructure spending arms race, instead leaning on its partnership with Alphabet’s Gemini to improve its AI offerings. We continue to like that capital-light strategy and see the broader rollout of Apple Intelligence later this year as an important catalyst. September is going to be a big month for Apple. Tim Cook will become executive chairman on Sept. 1, relinquishing the CEO role to hardware chief John Ternus. The company will also hold its annual iPhone launch event, and we expect memory-driven price hikes, as we saw with Macs and iPads. Meta Platforms down 12.9% The Facebook and Instagram parent went from one of our best performers heading into July’s Monthly Meeting to one of our worst ahead of August’s meeting. That’s because after-the-bell earnings on July 29 revived concerns about Meta ‘s massive AI spending. While the advertising business remained strong, investors focused on a softer revenue outlook, higher capital spending, and a roughly 91% decline in quarterly free cash flow. Meta CEO Mark Zuckerberg also did little on the earnings call to convince Wall Street that those investments will generate meaningful returns anytime soon, despite confirming plans last month for a public cloud buildout. (Jim Cramer’s Charitable Trust is long AAPL, CRM, ETN, FDXF, META, MSFT. See here for a full list of the stocks.) As a subscriber to the CNBC Investing Club with Jim Cramer, you will receive a trade alert before Jim makes a trade. Jim waits 45 minutes after sending a trade alert before buying or selling a stock in his charitable trust’s portfolio. If Jim has talked about a stock on CNBC TV, he waits 72 hours after issuing the trade alert before executing the trade. THE ABOVE INVESTING CLUB INFORMATION IS SUBJECT TO OUR TERMS AND CONDITIONS AND PRIVACY POLICY , TOGETHER WITH OUR DISCLAIMER . NO FIDUCIARY OBLIGATION OR DUTY EXISTS, OR IS CREATED, BY VIRTUE OF YOUR RECEIPT OF ANY INFORMATION PROVIDED IN CONNECTION WITH THE INVESTING CLUB. NO SPECIFIC OUTCOME OR PROFIT IS GUARANTEED.
3 of our stocks surged in the AI trade came back. 3 others stumbled
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