To The Moon

Alphabet's Q4 earnings fell short of expectations, with revenue coming in slightly below estimates. Despite the miss, the company's core search advertising business performed better than anticipated, offering some reassurance to investors. However, cloud revenue growth lagged behind projections, which remains a crucial concern as competition intensifies in the cloud computing space. Adding to investor worries, Alphabet announced plans to spend $75 billion on capital expenditures in 2025—significantly higher than expected—raising questions about the potential impact on profitability.

On the other hand, Amazon exceeded Wall Street sales estimates for the final quarter of last year. However, there are weaknesses in its cloud computing segment and lower-than-expected revenue guidance. Upcoming Amazon earnings will likely focus heavily on AWS performance, which is a critical profit driver for the company.

Investor Insights

It’s true that many investors remain overly optimistic about tech stocks, which often fuels hype-driven valuations. Take Alphabet (GOOG) as an example: closing yesterday at $193.31, the stock is hovering near its 52-week high of $208.70. While it’s a fantastic company with a strong brand, at this price level and considering its low dividend yield, it may not be an attractive buy for value-oriented investors seeking income.

Alphabet (GOOG)

Similarly, Amazon (AMZN) closed at $238.83, up 1.13% from the previous trading day and also near its 52-week high. Despite the company’s operational strength and vast e-commerce and cloud presence, its lack of dividends makes it less appealing for dividend-focused investors. The stock isn’t on my watchlist either for this very reason.

Amazon.com (AMZN)

Why Avoid FOMO on Tech Stocks?

It's tempting to chase tech stocks when they're riding a wave of market enthusiasm. But here’s the catch: if you missed buying these stocks at lower prices before they soared, jumping in now often exposes you to overpriced entries. Given the current elevated valuations, the risk-reward ratio for these stocks isn’t attractive, particularly for investors who prioritize stable, income-generating holdings.

Moreover, tech stocks tend to be more volatile, especially when faced with macroeconomic uncertainties or company-specific setbacks like cloud growth slowing. FOMO (fear of missing out) can lead to impulsive decisions, but disciplined investing often pays off in the long run by focusing on companies that meet valuation and dividend criteria.

What’s Next for Tech Investors?

If you're considering an investment in tech but wary of the current high prices, it might be wise to:

1. Wait for a Market Correction: Tech stocks tend to experience pullbacks. Patience could help you buy at more reasonable valuations.

2. Monitor Cloud Growth: Cloud computing remains a key growth area for both Alphabet and Amazon. Keep an eye on developments in this segment during future earnings reports.

3. Look Beyond Mega-Caps: Explore mid-cap tech companies with solid fundamentals but less hype.

4. Prioritize Dividend Stocks: Consider tech companies that offer dividends, as some mature players in the industry have started rewarding shareholders.

5. Sector Diversification: Balance tech exposure with investments in sectors offering more stable dividend payouts, like utilities, consumer staples, or healthcare.