I'm Dan Sheehan, a wealth advisor / financial planner based in Charlotte, NC. I work with high earners, families, and business owners on the things that actually move the needle over a lifetime: building the plan, managing the portfolio, and getting the tax picture right. Most of my clients came to me knowing they were doing well but suspecting they were leaving something on the table. Usually they were. This newsletter is where I share the thinking behind that work, one topic at a time.
Good morning investors,
The countdown to the real test of this earnings season ends today. Alphabet and Tesla open their books after the close, and between them they will tell us as much as anything about the AI trade.
Yesterday was a strong one. The S&P added 0.9%, the Nasdaq 1.3%, and the Dow 0.7%, led again by the semiconductors, which continue to snap back from the drubbing they took last week. The tone this morning has softened, with futures pointing modestly lower as oil climbs hard once more. Brent has pushed above $94 and briefly cleared $95, its highest in nearly six weeks, after an eleventh straight night of US strikes on Iran and comments from Secretary Rubio that Tehran is not serious about talks. Gold has run to a two week high near $4,125 and silver is firm. Besides the two megacaps, we get IBM after last week's collapse, along with AT&T, ServiceNow, GE Vernova, and Texas Instruments.
What Alphabet Has to Prove
Of the two names tonight, Alphabet is the one I will be watching as a read on the whole trade. It is the closest thing we have to a pure hyperscaler reporting first, and the question hanging over the entire group lands on its desk. The market has spent two years happily funding the buildout on faith. Now it wants to see the money coming back the other way.
Cloud revenue is expected to land around $22 billion, up better than 60% from a year ago, and the contracted backlog of work Google has yet to deliver is forecast to have grown several times over. Those are the numbers that show demand is real and monetizing, not just promised. Alphabet has held up better than its peers over the past few months, up around 4% while Meta and Microsoft have slipped, partly on news it is developing its own chip to run Gemini more efficiently. There is a report out that the next Gemini model has been delayed over performance concerns, which the company disputes. In a market this focused on who is winning the model race, any hint of slipping behind cheaper competition matters.
What I want from Alphabet is evidence that the cloud business is converting the enormous capital spending into profit, a commitment to keep investing without the number ballooning past what returns can justify, and enough on the model side to hold off the challengers. Get those three and it validates the case I have been building that the best of the megacaps are worth owning again after being left for dead. Google has done this well so far, and the stock reflects it.
Tesla Is Its Own Animal
Tesla is a different completely. It does not stand in for the EV trade or the AI trade or anything else. It stands for itself, and tonight is really a check on whether Musk's bets are progressing fast enough to justify what the market pays for the stock.
The unusual part this quarter is that the car business is the good news. Deliveries came in around 480,000, up 25% and well ahead of expectations, helped by the fully ramped Model Y, aggressive pricing, and the fading of the political drag that Musk's Washington detour created. Europe has been the standout, with registrations up sharply, enough that the company is lifting production at its Berlin plant. Energy storage deployments jumped more than 50% from the prior quarter. Revenue should land around $26 billion, up 16%.
The number I will go to first is free cash flow, and it is expected to be deeply negative, somewhere around minus $3 billion as capital spending more than doubles to nearly $7 billion. Tesla is pouring money into the Optimus robot, AI data centers, and the Cybercab ramp all at once, right as the auto side finally improves. Those are the moonshots that justify the valuation, and they are burning cash to build. Can robotaxi and Optimus advance quickly enough to earn an accelerating investment cycle? One note of caution for anyone tempted to bet on a clean beat tonight. Tesla has missed earnings estimates in five of the last eight quarters, and the stock is already down around 16% this year.
IBM Gets Its Chance to Explain
IBM reports fully today, two weeks after the preannouncement that took the stock down 25% in its worst session in over a century. The story then was that enterprise clients abruptly rerouted their budgets toward servers and memory to lock in supply ahead of price increases, pulling dollars straight out of software.
I keep coming back to why that mattered beyond IBM itself. It was the clearest evidence yet that enterprise technology budgets are a fixed pool being reallocated rather than an ever expanding one. The companies selling scarce hardware keep their pricing power and their customer lists, and everyone building the rest has to fight over what remains. Today we find out whether that late-June shift was a one off scramble or the start of a lasting rotation. The read matters for the whole software group, and ServiceNow reporting the same day gives us a second data point on whether corporate tech spending is holding up or getting squeezed.
The Power Trade Keeps Delivering
GE Vernova reports today and it goes straight to the theme I have held with the most conviction all year. The company lifted its full-year revenue guidance for the second time running, now looking for something north of $45 billion, and booked more than $24 billion in orders in the quarter as demand for power and electrification equipment keeps accelerating. This is the part of the AI story I never tire of pointing to. The models and the chips get the headlines, but none of it runs without electricity, and the companies that build the turbines, the grid gear, and the electrical backbone are selling everything they can make. GE Vernova's turbine order book has been spoken for years out, and each raise like this confirms the bottleneck is real and lasting.
Super Micro added to the same picture yesterday, jumping 17% after saying it booked over $60 billion in new orders in its latest quarter and lifting its margin outlook well above where it had guided, helped by a plan to build an AI data center alongside SpaceX. Set that next to the hedge funds fleeing tech and the bubble talk, and you have builders committing enormous sums to physical capacity. The spending on the buildout is accelerating, not slowing, and the value keeps accruing to whoever supplies the picks and shovels. That is where I remain most comfortable.
The War Keeps Pushing Oil Higher
The conflict is not de-escalating, whatever the diplomatic noise around it suggested a day ago. Eleven consecutive nights of strikes, Rubio publicly doubting Iran's seriousness, and Brent back above $94 tells you the ten day ceasefire chatter has gone quiet. Every leg higher in crude feeds the same worry, that energy keeps consumer prices elevated and hands the Fed a reason to lean toward a hike rather than a hold. The market now prices roughly a 24% chance of a move this month and close to 70% odds of at least a quarter point by September.
My read has not shifted, though the timeline keeps testing my patience. The political incentive to settle this before the midterms remains the strongest force in the equation, and neither side wants the kind of prolonged escalation that puts American troops on the ground. Getting to a resolution is proving slower and messier than anyone hoped, and until it arrives the supply picture tightens week by week. Energy exposure continues to do its job in a portfolio, and gold running to a two week high is a reminder of why a little ballast against this kind of uncertainty earns its keep.
A Note on Positioning and the Crowd
Short interest across NYSE-listed stocks reached a record 9% of shares outstanding in late June, well above where it peaked in the 2008 crisis or the 2020 panic. Short interest in the S&P and Russell is also near the highest in the data. A great many people are positioned for the market to fall.
I raise it because it connects to the caveat I gave yesterday on my own pullback view. I still expect chop through the summer and a pullback before the market pushes higher into year end, following the midterm year pattern that has held for decades. When this many participants are leaning the same way, though, the short term odds of the decline arriving on schedule go down, and the fuel for a squeeze higher goes up. This is exactly what I wrote in March at the lows. I hold my base case while respecting that the crowd has crowded onto the same side of the boat. It is exactly the kind of setup where a strong batch of megacap earnings tonight could force a lot of covering.
Worth a mention that even the index providers are now acting on concentration. MSCI said it will temporarily cap any single company at 25% of its Enhanced Value index to manage the risk that a handful of megacaps now dominate. I have written to clients about exactly this, that owning a broad index today means owning far more concentration than most people realize. When the people who build the benchmarks start putting guardrails on it, the point rather makes itself.
Final Thought
Tonight is the hinge the whole month has been building toward. Alphabet will tell us whether the hyperscalers are turning their spending into profit, and Tesla will tell us whether Musk's bets are moving fast enough to justify the cash going out the door. IBM and ServiceNow fill in the picture on whether enterprise budgets are rotating or holding, and GE Vernova keeps confirming that the power side of the buildout is as strong as ever. That is a lot of signal in one session, and it will shape how the back half of the summer trades.
My positioning holds. I like small caps and the sectors picking up leadership while the chips consolidate. The Magnificent Seven keep my attention because sentiment on the group that still drives most of the index's earnings has turned negative enough to interest me, and tonight is the test of whether the numbers back that up. I stay most constructive on the physical layer of the AI trade, the power and infrastructure names that keep raising guidance. Energy stays on as a hedge with the war unresolved and oil above $90 on Brent, and I keep watching the long end of the curve, where the 30-year sits above 5.1%, more closely than the daily moves in the semiconductors.
Alphabet and Tesla after the bell, IBM, ServiceNow, and GE Vernova alongside them. If any of this has you wondering whether your portfolio fits your goals rather than the day's headlines, that is a conversation I am always glad to have.
Best regards,
Dan Sheehan [email protected]
Subscribe to Market Pulse: https://substack.com/@dansheehan3
Market Pulse with Dan Sheehan is a personal market commentary newsletter and is independent from my employer. The content is provided for informational and educational purposes only and reflects my views as of the publication date, which may change without notice. Nothing contained herein should be construed as personalized investment, legal, tax, or financial advice, or as a recommendation to buy or sell any security. Any positions discussed represent my own views and may not be suitable for every reader's objectives, financial situation, or risk tolerance. Information is derived from publicly available sources believed to be reliable, but accuracy and completeness cannot be guaranteed. Readers should conduct their own research and consult their own professional advisers before making financial decisions.
Work With Me
Want more hands on support with your financial planning / wealth management. Feel Free to reach out to me: [email protected]