Two Shades of 'Magnificent'
The worst and best of the market leaders... Tesla's worst quarter in years... Alphabet ups its AI bet... The best buy of the Magnificent Seven... Nvidia could be due for a pullback... And so could 'the rest'...
The Magnificent Seven are off to a mixed earnings season...
We'll start today's edition by looking at the first Mag Seven earnings reports this quarter... from electric-vehicle maker Tesla (TSLA) and Internet giant Alphabet (GOOGL).
Both Tesla's earnings and revenue for the quarter fell short of Wall Street's estimates. Automotive revenue came in at $16.7 billion, down 16% from the same quarter a year ago. And global vehicle deliveries fell 13%.
Auto revenue is down more than 20% from the second quarter of 2023, with two straight years of declines. Overall revenue fell 12% from the prior year, its steepest decline since 2012.
As our colleague Steven Longenecker wrote for our Stock Market Trends website today, Tesla is facing strong headwinds and big questions...
For years, the perception of Tesla was that it was more than a car. It was a statement.
Early adopters weren't just buying an electric vehicle ("EV")... They were backing a movement.
But now, Tesla CEO Elon Musk's political entanglements have turned that same brand into a liability for left-leaning consumers. And its struggling car business may hinge on its long-promised affordable EV model that started production in June.
Earlier this month, we wrote about the challenges Musk is facing now that he's back "full time" in his role as Tesla's CEO. And on the company's earnings call, Musk acknowledged that Tesla "could have a few rough quarters."
The market seems to agree. Tesla shares fell 6% in overnight trading after yesterday's report and closed today almost 9% lower. The stock is now down nearly 20% since the start of the year.
We don't recommend buying the dip. While you can find reasons for optimism around the company, you can also find better places to put your money to work right now.
You see, Tesla shares are still the most expensive of any of the Mag Seven companies – at more than 100 times earnings. And it's facing declining auto revenue. That's not what we're looking for in a long-term investment.
Alphabet's earnings were a different story...
Alphabet, the parent company of Google and YouTube, beat Wall Street estimates for revenue and earnings.
Overall, sales grew 14% year over year ("YOY"), led by 32% growth in Alphabet's cloud division. But all its segments – including search, advertising, and YouTube – saw revenue growth.
It grew its earnings even more... Alphabet reported net income of $28.2 billion in the quarter, up nearly 20% YOY. As our colleague and Stansberry's Investment Advisory editor Whitney Tilson wrote about Alphabet in his free daily newsletter today...
It's incredible that a company of this size – with trailing-12-month revenue of $371 billion – can keep growing this quickly and this profitably.
This most recent quarter is more evidence of the "incredible" growth for a company with a $2.3 trillion market cap.
And there's another important takeaway from this earnings report...
Alphabet is upping its investment in AI...
In his statement alongside the earnings release, CEO Sundar Pichai said that Alphabet plans to spend $85 billion on capital expenditures in 2025. That's up from the $75 billion guidance from February.
Pichai cited "strong and growing demand for our Cloud products and services" as well as strong performance for its AI offerings. In short, Alphabet is upping its bets on AI and cloud data centers to maintain its position as one of the leaders in this trend.
We've been keeping an eye on if – or when – mega-cap tech companies would signal a slowdown with their AI-related spending since the trend has been a huge tailwind for the overall market over the past few years.
For Alphabet, at least, it's still full speed ahead.
Investors liked this update more than Tesla's – but they still weren't exuberant about the company today. Alphabet shares finished around 1% higher.
If you're looking for a long-term investment in the Mag Seven, Alphabet could be your best bet. As Whitney wrote today, its price-to-earnings multiple is around 20 times...
That's well below the 22 times to 24 times forward multiple of the S&P 500 today (depending on whose estimates you use).
It makes no sense that one of the greatest businesses of all time trades at a lower multiple than the average large U.S. business.
In addition, Alphabet boasts the lowest P/E multiple among its peer mega-cap tech stocks...
Meta Platforms (META) is the next "cheapest" Mag Seven at 28 times earnings. As we wrote yesterday, though, in general, we'd be careful around the Mag Seven this earnings season.
Nvidia (NVDA) could be due for a pullback...
The chipmaker and AI household name doesn't report its quarterly earnings until late August. Perhaps, by then, there will be a better setup for bulls to buy shares. But it doesn't look like it right now.
Nvidia has been trading at new all-time highs again lately, and it crossed the $4 trillion market-cap mark. The company is also trading at an eye-popping 55 times earnings.
And the stock "may be on the verge of a major pullback," as our friend and Stansberry Research senior analyst Jeff Havenstein described in yesterday's free Health & Wealth Bulletin...
He highlighted Nvidia's relative strength index ("RSI") as an indicator that NVDA shares are "overbought" right now and have been for a long stretch, which is now an area of concern...
Basically, the RSI is a contrarian indicator. It shows when a stock or index moves too far or too fast in either direction by flagging overbought and "oversold" signals.
When the RSI moves above 70, the stock or index is considered overbought, and a downturn is likely. When the RSI falls below 30, it hits oversold territory, and a reversal higher often follows.
Nvidia is up 77% since its April 4 low. But it appears the stock has gotten ahead of itself...
It's now in deeply overbought territory, with a 14-day RSI around 80.
The last time we saw this high of a reading was back in June 2024. And that was just before Nvidia went on to fall 27%. Take a look...
So although it may sound exciting to buy Nvidia while it has momentum, it's very possible the stock will shed some of its gains over the next few weeks. Of course, stocks can remain in overbought territory for a while. But eventually, Nvidia will pull back.
If – and when – Nvidia pulls back, it might be a decent longer-term buying opportunity. But if you have the stock in your portfolio already and are sitting on big gains, Jeff suggests it might be a good time to take some profits.
As for the rest of the Mag Seven, Meta Platforms and Microsoft (MSFT) report earnings on July 30. Amazon (AMZN) and Apple (AAPL) report on July 31.
Meanwhile, today in meme-stock land...
We're continuing to see signs of heightened speculation in beaten-down stocks...
Retailer American Eagle Outfitters (AEO) – a decently shorted stock by Wall Street (13% of its shares outstanding are sold short, according to FactSet) – saw shares rise as much as 12% today.
The catalyst? An announcement from American Eagle that actor Sydney Sweeney (from the TV show Euphoria) will headline a fall denim campaign. Well, that, and a group from Reddit's WallStreetBets crowd are fond of the young-adult brand.
A time to be careful...
As we've been saying, there are signs of froth in parts of the market. So we wouldn't be surprised to see a cooldown in the post-Liberation Day rally. It doesn't mean it's time to go "all out" of stocks, but it's wise to be careful when putting new money to work.
Sentiment indicators and positioning (with Wall Street having a historic low allocated to cash these days) aside, our Ten Stock Trader editor Greg Diamond, an expert technical analyst, today wrote to his subscribers that the "daily, weekly, and even monthly charts of the Nasdaq Composite Index are showing signs of divergence and a short-term topping pattern."
Greg alerted subscribers to lock in a modest 5% gain on tech stocks – his 28th winning trade of the year in Ten Stock Trader – as he says the upcoming Federal Reserve meeting from July 29 to July 30 and more earnings over the next two weeks could lead to a bout of volatility.
New 52-week highs (as of 7/23/25): ABB (ABBNY), Allegion (ALLE), Valterra Platinum (ANGPY), Cal-Maine Foods (CALM), Cameco (CCJ), Crispr Therapeutics (CRSP), WisdomTree Japan SmallCap Dividend Fund (DFJ), Dimensional International Small Cap Value Fund (DISV), iShares MSCI Emerging Markets ex China Fund (EMXC), iShares MSCI Italy Fund (EWI), iShares MSCI Spain Fund (EWP), Cambria Emerging Shareholder Yield Fund (EYLD), Franklin FTSE Japan Fund (FLJP), Cambria Foreign Shareholder Yield Fund (FYLD), GE Vernova (GEV), iShares Convertible Bond Fund (ICVT), iShares U.S. Aerospace & Defense Fund (ITA), JPMorgan Chase (JPM), Lincoln Electric (LECO), NetEase (NTES), Ormat Technologies (ORA), Rithm Capital (RITM), ResMed (RMD), Stryker (SYK), TransDigm (TDG), Global X Uranium Fund (URA), Vanguard FTSE Europe Fund (VGK), Vanguard S&P 500 Fund (VOO), Vistra (VST), and Industrial Select Sector SPDR Fund (XLI).
In today's mailbag, continued conversation about Adam Smith and the state of the U.S. economy (stemming from the tariff discussion). Plus, we fulfill a simple request... Do you have a comment or question? As always, e-mail us at feedback@stansberryresearch.com.
"Regarding the question [from subscriber Philip M. in yesterday's mail] 'How can the U.S. be the richest nation when it is $38 trillion in debt with some estimates up to $200 trillion in unfunded liabilities in entitlement programs?'...
"My answer is that with a total private wealth of $139.9 trillion the U.S. is the richest country in the world and China is the second richest at $84.4 trillion (if Europe were a country and not a trading bloc then it would be second). When ranked by wealth to GDP ratio the U.S. is fifth.
"The reason the U.S. does not feel like the richest country is that wealth is heavily concentrated so when you look at median wealth per adult the U.S. is 15th." – Subscriber S.J.I.
"Subscriber E.G. [in Tuesday's mail] now has me scratching my head (I have already lost my hair so I don't have much to lose). I have to disagree that Adam Smith's principle of OPEN, UNFETTERED trade is invalidated because the world has grown (8 billion people), and the number of countries has increased tremendously (195). It is still to each country's advantage to export the product or service they have a competitive advantage and import goods and services in which they are at a disadvantage. But, again, if some countries block imports by imposing financial tariffs or non-financial restrictions the concept falls apart.
"Yes, even if we could convince the rest of the world to drop all tariff and non-tariff restrictions so U.S. companies can openly compete in each country's markets, we would still have a very large deficit(s). BUT at least U.S. companies would get fair treatment to try and sell their products or services and 'let the chips fall where they may.' However, it appears that letting even one dollar of capital flow out of their country is anathema to most countries in the world including our buddies in Europe.
"Last point, if you want to read the most boring 'book' in the world, look up the GATT ([General Agreement on Tariffs and Trade]). It will inform you on the ridiculous trade rules OUR POLITICIANS have agreed to. The USA is the biggest, richest most productive country in the world. But we have given away a lot of wealth through these more than generous trade rules.
"Again, in my opinion, enough is enough. It is time for a fair and balanced trade structure." – Subscriber J.P.
"Corey/Nick, I would like to see you mention Caterpillar (CAT) of reaching a new 52-week high at the close of today's market. It also marked a record high ever achieved by CAT!" – Stansberry Alliance member John M.
Corey McLaughlin comment: Simple enough. The stock is also up about 60% since its 52-week low on April 8, the day before the initial 90-day reciprocal tariff "pause."
All the best,
Corey McLaughlin and Nick Koziol
Baltimore, Maryland
July 24, 2025