Happy Friday! Big Tech earnings continue to roll out, each expressing a unique view of how tariffs are impacting their business. Apple, for one, seems uniquely exposed to China — that’s today’s big story.

Quarterly reports don’t cut it

Earnings don’t matter when Apple looks like a trade war proxy. 

Despite beating Wall Street’s earnings expectations, shares of Apple dropped 4% in overnight trading.

Not because of weak iPhone sales or margin pressures, but on account of tariff uncertainty and China. 

For the first quarter, Apple’s revenue hit $95.4 billion, with nearly half of that stemming from its smartphones. Mac and iPad sales also topped estimates. Yet chief executive Tim Cook warned that Apple’s costs for the new quarter could climb to $900 million.

“We will manage the company the way we always have with thoughtful and deliberate decisions, with a focus on investing for the long term and with dedication to innovation and the possibilities it creates,” Cook said on the earnings call.

In response to mounting trade war risks, the company is shifting some iPhone production to India and Vietnam.

But it’s a logistical play aimed at tariff insulation, not a lasting solution.

The vast majority of Apple products are still made in China, and Cook himself admitted that disentangling from that supply chain won’t be easy.

That makes Apple uniquely exposed among the Magnificent Seven. It helped build much of China’s modern infrastructure base. It can’t easily come undone just because Washington and Beijing fall out of sync.

All this comes at a moment when the S&P 500 continues to lean heavily on Big Tech. The Magnificent Seven account for roughly a third of the index’s $47 trillion market cap. 

Meta and Microsoft sparked a broad rally this week with blockbuster earnings. But Apple’s results, while solid, failed to carry on the pattern. 

Cook is right to diversify out of China. But geopolitics move faster than supply chains, and incremental progress shared on earnings calls won’t reassure markets. 

Even if Apple keeps delivering iPhones to customers, it may be losing its grip on investors. 

Market snapshot

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Elsewhere

📊 April’s jobs report is due. Total non-farm payrolls for the month are expected to rise by 135,000, according to analyst estimates. That’s less than the trailing 12-month average of 156,800, and less than the 228,000 seen in March. (FactSet)

📈 Microsoft stock skyrocketed Thursday. Following its monster earnings beat, shares jumped nearly 8% on the day for its largest post-earnings percentage gain since October 2015. (Barron’s)

Rapid-fire

• Ken Griffin’s Citadel posted gains in April and it’s now up for the year (WSJ)

• Nvidia CEO Jensen Huang is getting his first salary raise in a decade to $49.9 million (CNBC)

• President Trump will reportedly propose slashing $163 billion in government spending in a new budget (WSJ)

• Cheap stocks and rock-bottom borrowing rates has led Berkshire Hathaway to build sizable positions in multiple Japanese trading companies (Morningstar)

• Airbnb issued weak guidance for the coming quarter and the stock dropped overnight (CNBC)

• The US remains 15.6% below April 2019 housing inventory levels (ResiClub)

• Stocks, gold, and bitcoin are telling the bears they are wrong (Pomp Letter)

Last thing

About me

📰 I’m Phil Rosen, co-founder and editor-in-chief of Opening Bell Daily. I’ve published books, lived on three continents, and won awards for my journalism, which has appeared in Business Insider, Fortune, Yahoo Finance, Bloomberg and Inc. Magazine.

I write our flagship newsletter to prepare you for each trading day, unpacking markets, economic data and Wall Street with analysis you won’t find anywhere else. Feedback? Reply to this email, ping me on X @philrosenn, or write me directly at [email protected].