'Not today': analyst saw reason for optimism in market anxiety over bigtechs

The market is gripped by anxiety ahead of reports from major tech companies, according to Evercore ISI strategist Julian Emanuel. Why does he think this is good news and which stocks does he suggest adding to a portfolio?

"Tech companies enter the reporting season for the last quarter of 2025 with one of the most pessimistic sentiments of the entire AI bull market," Emanuel wrote in a note cited by MarketWatch.

Four of the "Magnificent Seven" companies are expected to report this week: Microsoft, Meta Platforms, Tesla and Apple. Two more - Amazon and Alphabet - will reveal their results next week.

According to strategist Evercore ISI, the technology sector is trading at the lowest c pandemic premium relative to the S&P 500 index. "Looking at the Magnificent Seven's price-to-earnings ratio, it is in line with average post-pandemic valuations, while the other 493 stocks in the S&P 500 are trading near historically high valuations," he writes.

Strategist recognizes that there are many reasons for alarm on the topic of artificial intelligence, including inflated valuations and disappointing adoption rates. In addition, rising leverage and circular deals are adding to concerns that investing in AI companies may contain systemic risks.

That said, he adds: "Much like the bull market development of the Internet revolution of the late 1990s, which ended with a crash in 2000-2002, there may come a day when these concerns will actually matter. But it won't be today."

The market's caution may be good news, Emanuel continued. The strategist recalled that investors were much more optimistic before the previous reporting season. As a result, Oracle shares collapsed nearly 11% after the disappointing results were released.

Evercore is buying shares of hyperscalers, including Amazon and Alphabet, as well as tech companies with a high proportion of shorts relative to the two-year period. Among them are Qualcomm, Skyworks Solutions and Fortinet, MarketWatch writes.

Emanuel also suggests using a strategy called "risk inversion" with Microsoft, Meta and Apple. It involves simultaneously selling a put option and buying a call option. Combining these options gives the buyer the right to sell/buy the stock at a certain price within a certain time frame. This strategy is used by bulls when they want to reduce the cost of a long position.

This article was AI-translated and verified by a human editor