Dan Niles, founder and portfolio manager at Niles Investment Management, joined CNBC’s ‘Closing Bell Overtime’ to discuss the upcoming earnings from the “Magnificent Seven” tech companies and his outlook on their performance. As Tesla (TSLA), Microsoft (MSFT), and Meta Platforms (META) are set to report on Wednesday, followed by Apple (AAPL) on Thursday, the market is keenly watching how these giants will influence the tech sector and broader market sentiment.
Niles expressed skepticism about the group from an equities perspective, emphasizing that it’s not the earnings data itself but the market’s reaction to this data that will be critical. He pointed out historical market behavior, noting how in 2021, despite a significant inflation increase, the market rose, whereas in 2022, a decrease in inflation coincided with a market downturn, underscoring the importance of investor sentiment over raw numbers.
Regarding Apple, Niles anticipates a cut in guidance, which has been largely anticipated by the market. The real test, he suggests, will be how investors react to this scenario. “Everybody on the planet is expecting Apple to cut their numbers, which I think will happen. And so then the question is gonna be how do investors react to that?“, Niles said. With Apple trading at a Price/Earnings (P/E) ratio of 29 against the S&P 500’s 22, he questions whether the market will continue to buy into the narrative of an impending upgrade cycle, a justification that has kept Apple’s valuations high despite declining numbers.
On the flip side, Niles views Meta Platforms more favorably, suggesting that its use of AI and its advertising-driven model could withstand the lack of significant events like elections or the Olympics in Q1 2025. He highlighted that Meta has been one of the better performers year-to-date, with its stock up 11%, thanks to effective AI implementation and despite increased capital expenditures.
Niles drew a contrast between the companies’ approaches to AI, with Apple notably lagging, reflected in its stock performance, which is down 11% for the year. He sees Meta and Amazon (AMZN) as long-term winners, indicating a market increasingly differentiating between these tech giants based on technology adoption and strategic direction.
Regarding Microsoft, Niles expressed concerns due to its relationship with OpenAI and less optimistic guidance from their last report, suggesting potential tempering of expectations for Azure’s growth. He also touched on Tesla, noting its unique position due to Elon Musk’s political connections, particularly with Donald Trump, but clarified his current investment strategy focuses more on growth at a reasonable price rather than Tesla’s high volatility.
Niles concluded by advising against treating the Mag 7 as a monolithic group for investment decisions, as each company’s situation and market dynamics are increasingly distinct. His analysis suggests a nuanced approach to tech investing, where understanding each company’s specific challenges and opportunities will be key to navigating the post-earnings landscape.
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