👉 The Investing Week Ahead: Apple & AI

We also have one of the lowest-ever percentages of stocks within the S&P 500 that are outperforming the index itself — showing that the index is pretty dang “top heavy.”

Does this mean that stocks will go down? Not necessarily — but it means that earnings reports over the summer and fall of the biggest companies in the world are going to be THAT MUCH MORE important!

We’ll be breaking down all of them for you, and we highly suggest that you join our community to receive the Week in Review posts each week!

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What We’re Watching:

Broadcom (+26.0% YTD) will release earnings after the bell this Wednesday — with analysts expecting YoY top-line growth of more than +37% because of the AI revolution.  

Like Nvidia — Broadcom has consistently raised guidance during earnings reports. Bulls expect nothing less, but bears think the stock is too expensive — despite being a free cash flow machine.

Oracle (+19.4% YTD) will release its results after market close this Tuesday — with many analysts expecting a slight drop in yearly profit.  In March, Oracle's Q4 guidance was modest suggesting a +4-6% YoY revenue increase — with enterprise spending focused more on AI than core offerings.

However, strong partnerships like that with Microsoft's Azure and an $8 billion investment in Japan are keeping bulls excited for this report.

Mike Zaccardi of Seeking Alpha upgraded Oracle shares from Hold to Buy just ahead of the earnings.

He notes: "Semiconductor stocks are outperforming software companies amid an AI arms race, leaving some SaaS firms attractively priced. We need to see strong numbers from its SaaS applications, cloud infrastructure technologies, and products. Specifically, its margins will be closely scrutinized along with the firm's forward growth outlook."

Apple faces scrutiny from a U.S. antitrust lawsuit and new European laws, and it has seen stagnant iPhone sales and a slowdown in R&D spending.

Investors are hopeful that AI developments will reignite Apple's growth and competitiveness against big tech competitors that are crushing them from an AI perspective (i.e. Microsoft and Google). Analysts believe AI could refresh iPhone sales, particularly with new features exclusive to high-end models.

“A stock split is a vote of confidence from management that the stock will hold its value, as the stock [price] typically increases.” 

— Howard Silverblatt, Senior Analyst at S&P Dow Jones Indices

“While high profile splits have often fueled stock volatility — speculative buying and profit taking around the event — thinning the trees within the forest post-split catalyzes the buying opportunity for the patient investor.”

— Julian Emanuel, Senior MD at Evercore ISI

Despite Musk achieving the required market value and profit goals, Tesla shares are down -28.6% YTD and -60% from their late 2021 peak. Tesla's board supports the package, while advisory groups oppose it. The outcome is crucial for Tesla’s strategic direction, with Musk's continued involvement seen as vital by many analysts.

What We’re Watching:

The May CPI report will be released on Tuesday. Economists forecast headline inflation will be up +0.1% MoM and +3.4% YoY to an ATH of 313.5 points.

"Policymakers will need to see a few slower inflation reports over the summer in order to start cutting rates by the fall.” 

— Sarah House, Senior Economist at Wells Fargo

The Federal Reserve Open Market Committee (FOMC) meets Tuesday and Wednesday this week. The federal funds rate has been kept at 5.25%-5.50% due to solid economic growth and ongoing inflation. The CME FedWatch Tool gives us a 99.4% chance of the Fed holding interest rates steady this week.

The bigger question we want answered is what will happen in the July and September meetings?

As sticky inflation remains, rate cuts could continue to be kicked down the road:

“The June FOMC meeting will be one of the most pivotal this year as Powell may provide the clearest hint yet to the rate-cut timetable. The new dot plot likely will indicate two 25-basis-point cuts this year, compared with three in the March version.”