Tech Heavyweights Alphabet and Microsoft reporting second quarter earnings after

the close and the first to show investors whether the hype around AI is

actually justified. That's the focus of today's Tech Check with Dear Dravosa.

D. Frank, we know the bullcase for mega cap tech.

And really we've seen it play out all year.

There's the pristine balance sheets, wide motes, generative AI, of course.

That's come along with ever higher valuations greater concentration and a

handful of names but it also raises the stakes this week because even a wobble from

any of them that could shake the whole market so just in case I wanted to use this time to highlight some

potential red flags. Red flag one that would be Tech's massive outperformance in the

first half. As Bernstein notes, Tech is now trading at a 54% premium to the market. That's its highest

level in 45 years other than the dot-com bubble and compare it to its

historical average premium of just 26%. It's not like the fundamentals either have boosted valuations this year.

Five of the six largest mega caps have had negative earnings provisions for

2023 over the last year and all of Tech's relative outperformance this year it has come

from multiple expansion so in other words the stock price is going up faster than

the fundamentals red flag to the generative AI hype cycle.

Investors have moved into this show me the money era.

So tech may have to justify this rally

with actual tangible AI-driven revenue and earnings.

There is always the chance we get another

NVIDIA which delivered exactly that but it's unlikely. Even Microsoft which got

...