High Bar for Tech Earnings This Week: Covley

Summary

Kelly Covley discusses the high bar for AI tech earnings this week, expecting idiosyncratic divergence among AI stocks. She also argues that oil prices will carry a permanent risk premium even after Strait of Hormuz reopening, using the Bab el-Mandeb precedent. She expects energy and tariff stories to modestly drag economic growth.

• AI stocks have rallied sharply and must now justify valuations with earnings.
• Covley sees short-term risk but longer-term opportunity in AI.
• She expects AI stocks to become more idiosyncratic with winners and losers.
• Oil prices likely to remain elevated due to lasting geopolitical risk premium.
• Strait of Hormuz reopening may not restore shipping to pre-conflict levels.
• Energy and tariff policies are seen as a drag on growth without causing inflation.
• Weak hiring prevents a wage-price feedback loop.
• Market currently prices in a return to normalcy for energy.