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Tariff fears and growth concerns have rocked technology stocks with the tech heavy Nasdaq declining for the past three weeks. Joining us now, Aaron Kessler, Seaport Research Partners senior analyst. There's a little bit of bounce today Aaron, that we got in some of these names, not universally, uh but we do have tech coming back a little bit today. But I I guess I would ask you first of all big picture, um you know, there is this concern seemingly about a slowing economy. How much is that potentially going to hurt big tech?

Yeah, now it's, we haven't really had a recession or slowing economy obviously in a few years here. I would say we've already discounted some of that in valuations. If you look at some of the large caps, they're off about 20% within our coverage universe including kind of Google, Amazon, Meta, they're all down right around 20%. Um our average name is down about 25%, some of the small caps are down a lot more than that. So we've already discounted, I think a fair amount of a perception of a slowing economy. Um and then what we'll have to watch over the next kind of couple months is what we actually see. We did see some headlines yesterday from the airlines, seeing some slower leisure traffic in the US, that you see in Airbnb down on that today. I think Booking in uh as well. Um but that, we'll have to watch some of these data points. Some of the companies, you could actually argue could be benefit from um, not so much benefit but hold up better. Let's say Amazon historically has held up pretty well in a slower environment as consumers switch to e-commerce. Maybe they don't want to drive and so that's actually held up fairly well. Continue to see cloud businesses doing fairly well. Um to the extent we don't get a deeper recession, still continue to expect pretty good cloud growth over the next few years as well.

If we saw that kind of economic weakness, pronounced economic weakness Aaron, what would it mean for example, those big tech companies that rely a lot on a healthy ad market?

Yeah, so I think it depends on the type of advertising. Historically, we see brand advertising get hit a little bit more than performance based. So uh performance based advertising, typically might be for travel or an e-commerce transaction. Typically, the advertisers want to continue to spend there as long as they're seeing good results and uh as long as consumers are spending. Um obviously if consumers are shopping less, they may be clicking less on a Google search result. So that could be a negative there. But historically performance based advertising channels, Google, Meta, have held up reasonably well. Um we have seen some softness. We saw like trade desks this quarter. Um a little bit of softness. Uh and so you can see some brand spend ease a little bit in a recessionary environment.

And let's dig into some of the specific names you cover because take Amazon as an example. This is obviously a big complex company. It's got AWS on the one hand, but on the other hand, a big part of its business is still retail. A lot of that stuff is imported, so could be subject to tariffs. Obviously also subject to consumer spending trends. So how has it weathered these types of periods before?

Yeah, historically Amazon has weathered them pretty well. You typically see a little bit of a trade down effect. And even over the last couple of years as growth has slowed, as the consumer has been more tight, they've actually shifted to Amazon to look for deals more on Amazon. Uh so if you look at Amazon relative to a lot of other traditional retailers, or um they've held up fairly well. And they've seen, I would say, the growth has moderated for Amazon on e-commerce the last couple years. Um on the other hand, they've been able to continue to drive nice advertising revenues and so I think investors have to look at that as well. Uh for Amazon and clearly the cloud growth is still growing nearly 20% for them. So it's not just a pure retail story anymore.

Aaron, any signs that the truly incredible amounts of money these big big tech companies are spending out on AI, any signs Aaron of that slowing down?

Uh we haven't seen that yet. I think all the companies gave pretty hefty uh CapEx expectations for 2025. So something we'll watch. Uh obviously there was some uh with the the deep sea news, some concern there um around what that meant for CapEx budgets. But clearly, uh CapEx guidance was pretty aggressive still for the year. Um I mean I think all the companies are working. I think I read today that Meta is working on custom chips as well for AI. So, I believe all the companies will look to uh bring down some of these CapEx costs over time. Uh but nothing we're hearing yet uh to suggest a big AI slowdown in 2025.

Generally Aaron, when you read through the recent earnings reports from these big tech companies that you've been covering for a long time, what did you make of them? I mean, when you saw the earnings beats, were they as strong as ever? Did they did they get a bit weaker?

Yeah, I know it's for the large cap companies, still very solid results. Um I think probably saw some more mixed results, maybe some of the advertise, maybe the small cap companies. But historically uh we've seen uh this quarter large cap companies deliver pretty solid results across the board. Um and uh typically they they've made some uh cost cuts and more cost uh cost efficient over the last few quarters as well. So they've uh done a pretty good job of maintaining pretty good top line growth at the same time being more disciplined on the bottom end.

Aaron, always great to see you, always great to have you on the show. Thank you for joining us.

Great, thank you guys.