QUESTION: With Big Tech earnings in full swing, how should advisors separate signal from noise and help clients navigate lofty valuations?
RESPONSE: Advisors can help clients navigate the current Big Tech earnings season by focusing on several key strategies:
- Evaluate Earnings Growth: It’s important to look at the earnings growth of tech companies. For instance, tech stocks are expected to generate earnings growth of approximately 18% for 2026, which is second only to the energy sector[1]. This indicates a strong growth potential that advisors should consider when evaluating tech investments.
- Consider Valuation Concerns: While tech stocks have underperformed in prior quarters, earnings have grown at a healthy rate, which has eased some valuation concerns[2]. Advisors should assess whether current valuations are justified by the earnings growth and future potential of these companies.
- Focus on Big Tech’s Role in Market Gains: Analysts have noted that gains in major stock indexes are increasingly driven by a narrow band of companies, particularly tech firms[3]. Advisors should be aware of this concentration risk and consider diversifying clients’ portfolios to mitigate potential volatility.
- Monitor AI and Technology Spending: There are concerns about Big Tech underspending on AI, which could impact future growth. Jim Cramer has highlighted the need for increased investment in AI by Big Tech companies[4][5]. Advisors should keep an eye on how these companies are allocating resources towards innovation and technology.
- Stay Informed on External Factors: Advisors should also consider external factors such as tariffs and geopolitical issues that could impact tech companies. For example, there are ongoing concerns about the impact of tariffs on technology businesses[6].
By focusing on these areas, advisors can help clients distinguish between short-term market noise and long-term investment signals, ensuring that their portfolios are well-positioned for future growth.
References
[1] Can Tech Lead Stocks Higher In The Second Half Of 2025? [Forbes] If we adjust our sights out even further using estimates for 2026, tech stocks are expected to generate earnings growth of ~18% — second only to energy, which is projected to grow earnings by 20% following a third consecutive year of negative growth in 2025. https://www.forbes.com/sites/bretkenwell/2025/07/17/can-tech-lead-stocks-higher-in-the-second-half-of-2025/
[2] Can Tech Lead Stocks Higher In The Second Half Of 2025? [Forbes] And because tech stocks underperformed in prior quarters while earnings grew at a healthy clip, valuation concerns have eased to some degree. https://www.forbes.com/sites/bretkenwell/2025/07/17/can-tech-lead-stocks-higher-in-the-second-half-of-2025/
[3] Trump’s trade deals are arriving, but details on how they’ll benefit the economy have yet to materialize [NBC News] And even as major stock indexes continue to churn higher to near-records, analysts say the gains are increasingly driven by an ever-narrower band of companies, like tech firms, that are largely unaffected by the tariffs. https://www.nbcnews.com/business/business-news/trump-trade-deals-are-arriving-how-they-might-affect-us-economy-rcna220465
[4] Jim Cramer says Big Tech is underspending on AI. Here’s why they may need to spend more [CNBC] Cramer said Alphabet’s recent quarter with an earnings beat suggests the hefty bet on new technology is worthwhile. https://www.cnbc.com/2025/07/24/jim-cramer-says-big-tech-is-underspending-on-ai-heres-why.html
[5] Jim Cramer says Big Tech is underspending on AI. Here’s why they may need to spend more [CNBC] Jim Cramer says Big Tech is underspending on AI. https://www.cnbc.com/2025/07/24/jim-cramer-says-big-tech-is-underspending-on-ai-heres-why.html
[6] Wall Street is upbeat on tech megacaps, but big questions loom on AI spending, China, Trump tariffs [CNBC] Last reporting period, investors worried about the strain of hefty tariffs on technology businesses and on whether big gambles on would lead to returns for shareholders, or were signs of an inflating bubble. https://www.cnbc.com/2025/07/22/tech-q2-earnings-preview-ai-spending-china-and-trump-tariffs-loom.html