AppLovin (NASDAQ: APP) stock has had a roller-coaster 2025, reaching an all-time high before being cut in half after it came under scrutiny in a short-seller report. Since then, the stock has recovered most of those losses after the advertising tech company posted blowout earnings and made a bold move to publicly bid on acquiring TikTok.

Let's examine the recent news and determine whether the stock is overhyped or if its lofty valuation is justified.

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AppLovin's growth demands attention

AppLovin recently reported its results for the first quarter of 2025, and the company did not disappoint. Total revenue rose 40% year over year to $1.48 billion, driven by its advertising segment, which matches advertisers and app publishers via auctions at a large scale and microsecond speeds.

The mobile tech company has accelerated its revenue by shifting its primary focus from gaming advertising to the broader global advertising economy, which opens up an opportunity for 10 million advertisers globally, according to management. During the first quarter, the company's advertising revenue increased to $1.16 billion, representing a 71% year-over-year rise.

Meanwhile, AppLovin generated $826 million in free cash flow, a key profitability metric, representing a 114% year-over-year increase. With its positive free cash flow, management has elected to repurchase its stock aggressively rather than pay down its $3.2 billion in net debt. Specifically, the company spent $1.2 billion in the first quarter, nearly $400 more than the company generated in free cash flow. Over the past three years, management has reduced its share count by 9.3%, which not only increases existing shareholders' ownership stake, but also suggests management is bullish on the company's long-term prospects.

In other developments, AppLovin sold its declining mobile gaming division to Tripledot Studios for $400 million in cash, along with an estimated 20% equity stake. The deal is expected to close as early as Q2 2025, further signaling management's confidence in its strategic pivot to advertising.

Enter TikTok

The most headline-grabbing move of 2025, however, wasn't AppLovin's earnings report or the sale of its gaming division; it was when the company disclosed that it is prepared to make a serious offer to acquire TikTok's global operations, should regulatory pressure force a divestiture. The bid would allow Chinese investors to retain a stake in TikTok, while AppLovin would manage its global operations. In CEO Adam Foroughi's words, AppLovin can offer a "much stronger bid than others" thanks to its technical infrastructure, monetization expertise, and real-time ad marketplace.

The price tag would likely be costly for the social media platform, with a reported 1.6 billion global users generating an estimated $23 billion in revenue in 2024. It could also be a lengthy and politically fraught acquisition process. Still, the possible move is exciting for investors to dream about and could spur the next phase of growth for AppLovin, which had a recent market capitalization of $140 billion.

Image source: Getty Images.

The short report and the AppLovin CEO's response

Of course, fast-growing tech companies often attract critics, and AppLovin is no exception. Recent short reports, including one from the investigative investment company Muddy Waters Research, accused AppLovin of violating the terms of service of key platform partners, resulting in an observed 23% client churn rate in the first quarter of 2025.

In an open-letter rebuttal, Foroughi addressed the claims head-on, arguing that "a few nefarious short-sellers are making false and misleading claims aimed at undermining our success." Furthermore, Foroughi called the report "littered with inaccuracies and false assertions," and emphasized that the company operates in full compliance with App Store policies, stressing that "there has been no churn" among its advertising clients.

For investors, it's important to understand that companies publishing short reports typically hold short positions in the companies they investigate. This means they are financially incentivized to release negative research -- whether or not it's fully substantiated. Notably, AppLovin's stock dropped nearly $66 to $261.70 per share after the report was published in March, but has since recovered and then some to over $414 per share as of this writing.

Is AppLovin a buy, sell, or hold?

Before buying any stock, it's essential to consider its valuation -- especially with high-growth tech companies, which often trade at premium levels due to their long-term potential. AppLovin is no exception, currently trading at 56.6 times its trailing-12-month free cash flow of $2.5 billion. However, that premium appears more reasonable given that free cash flow has grown nearly 80% year over year. The stock is also trading about 33% below its peak price-to-free-cash-flow multiple, suggesting a slight discount for new investors.

For growth investors who think long-term and believe in the power of scalable software and monetization, AppLovin remains a buy, regardless of whether or not TikTok is involved.

Should you invest $1,000 in AppLovin right now?

Before you buy stock in AppLovin, consider this:

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Consider when Netflix made this list on December 17, 2004... if you invested $1,000 at the time of our recommendation, you’d have $669,517!* Or when Nvidia made this list on April 15, 2005... if you invested $1,000 at the time of our recommendation, you’d have $868,615!*

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*Stock Advisor returns as of June 2, 2025

Collin Brantmeyer has positions in AppLovin. The Motley Fool has positions in and recommends AppLovin. The Motley Fool has a disclosure policy.

After weeks of arguments in the Federal Trade Commission's monopoly trial, Meta is done defending its decade-plus-old acquisitions of Instagram and WhatsApp—at least for now.

The seven-week trial ended Tuesday, with the FTC urging Judge James Boasberg to rule that a breakup is necessary to end Meta's alleged monopoly in the "personal social networking services" market, where Meta currently faces sparse competition among other apps connecting friends and family. As alleged by the FTC, Meta's internal emails laid bare that Meta's motive in acquiring both Instagram and WhatsApp was to pay whatever it took to snuff out dominant rivals threatening to lure users away from Facebook—Mark Zuckerberg's jewel.

Talking to Bloomberg, Meta has maintained that the FTC's case is weak, seeking to undo deals that the FTC approved long ago while ignoring the competition Meta faces from rivals in the broader social media market, like TikTok. But Meta's attempt to shut down the case mid-trial was rebuffed by Boasberg, who has signaled he will take months to weigh his decision.

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Meta thinks there's no reason to carry on with its defense after the Federal Trade Commission closed its monopoly case, and the company has moved to end the trial early by claiming that the FTC utterly failed to prove its case.

"The FTC has no proof that Meta has monopoly power," Meta's motion for judgment filed Thursday said, "and therefore the court should rule in favor of Meta."

According to Meta, the FTC failed to show evidence that "the overall quality of Meta’s apps has declined" or that the company shows too many ads to users. Meta says that's "fatal" to the FTC's case that the company wielded monopoly power to pursue more ad revenue while degrading user experience over time (an Internet trend known as "enshittification"). And on top of allegedly showing no evidence of "ad load, privacy, integrity, and features" degradation on Meta apps, Meta argued there's no precedent for an antitrust claim rooted in this alleged harm.

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The stock market has staged an impressive rebound following a turbulent last few months. The S&P 500 index, which had neared bear market territory when it was down 19% from its highs in April, has quickly recouped most of those losses and is now up 1% year to date as of this writing.

News of efforts by the Trump administration to negotiate bilateral trade deals has eased some fears that the worst-case scenario around various trade wars and economic disruptions may not come to pass. Robust corporate earnings by several companies have further bolstered investor optimism, particularly around the transformative potential of artificial intelligence (AI) as a key driver of economic growth.

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Here are three AI stocks that could be a great buy for your portfolio this month.

Image source: Getty Images.

1. Apple: A China trade truce winner

The U.S. and China are suspending retaliatory tariffs for 90 days (while keeping some tariffs) as they pursue a more comprehensive trade deal, and that has lessened the uncertainty around Apple (NASDAQ: AAPL).

The company relies heavily on China as a key market, accounting for nearly 17% of its global sales, and as a pivotal part of its supply chain, where over 80% of iPhones are manufactured. The pause on retaliatory tariffs, coupled with exemptions for electronics, allows Apple to focus on accelerating its AI-driven transformation.

The company is leveraging proprietary machine-learning models into a suite of new AI tools and capabilities through its Apple Intelligence initiative across its ecosystem. In its fiscal second-quarter report (for the period ended March 29), revenue climbed 5% year over year, with continued momentum in high-margin services driving an 8% increase in earnings per share (EPS) to $1.65.

These trends are expected to continue. Anticipation is building for the next-generation iOS 19 and iPhone 17, which are likely to be released after this year. The devices will integrate more AI-optimized features that could boost sales as users upgrade.

With shares of Apple still trading down about 18.5% from their 52-week high, the stock appears to be a compelling buy-the-dip opportunity for investors seeking exposure to the AI revolution.

2. AppLovin: A leader in AI-powered adtech

Share prices of AppLovin (NASDAQ: APP) have soared by 339% over the past year, amid accelerating growth and earnings. The advertising technology (adtech) innovator is capitalizing on the strong demand for its suite of mobile advertising solutions, now powered by artificial intelligence. Its Axon AI engine uses machine learning and advanced algorithms to boost ad engagement and conversions.

In the first quarter (for the period ended March 31), advertising revenue surged by 71% year over year, with management crediting its AI enhancements. Even more impressive was the 149% increase in EPS to $1.67.

AppLovin is expanding into the e-commerce sector, leveraging its Axon platform for hyper-targeted advertising for online retailers, which will use real-time data analytics and generative AI as a new growth driver. The company also intends to enter the video streaming market, a diversification beyond mobile gaming ads.

The stock trades at a forward price-to-earnings ratio (P/E) of 33, a reasonable level given the company's trajectory. These tailwinds, backed by overall solid fundamentals, should keep shares of AppLovin climbing higher.

3. Super Micro Computer: AI infrastructure tailwinds

Super Micro Computer (NASDAQ: SMCI) is a pivotal player in AI infrastructure, supplying rack-scale server systems that integrate power, storage, cooling, and software to support graphics processing unit AI chips from Nvidia.

Despite significant growth in recent years, Supermicro (as it is also known) faced several challenges in 2024, including a probe by the U.S. Department of Justice related to accounting concerns. This was reflected in the stock sell-off, with shares currently down about 62% from their all-time high. However, an independent special committee found no evidence of fraud or misconduct, and the company has since filed its audited 2024 annual report. By this measure, Supermicro is emerging as a comeback story.

The company excels in direct liquid cooling technology, which enhances energy efficiency for data-intensive AI workloads. Supermicro projects that over 30% of new data centers globally will adopt liquid-cooled infrastructure in 2025, signaling a major growth opportunity.

With Wall Street estimates for 2025 annual revenue growth of 48% and the stock trading at a forward P/E of just 22, Supermicro offers a compelling mix of high growth and value, making it well-positioned to reward shareholders over the long run.

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Dan Victor has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends AppLovin, Apple, and Nvidia. The Motley Fool has a disclosure policy.

The world has been abuzz for weeks now about the inclusion of a journalist in a group message of senior White House officials discussing plans for a military strike. In that case, the breach was the result of then-National Security Advisor Mike Waltz accidentally adding The Atlantic Editor-in-Chief Jeffrey Goldberg to the group chat and no one else in the chat noticing. But what if someone controlling or hacking a messenger platform could do the same thing?

When it comes to WhatsApp—the Meta-owned messenger that’s frequently touted for offering end-to-end encryption—it turns out you can.

A clean bill of health except for...

A team of researchers confirmed that behavior in a recently released formal analysis of WhatsApp group messaging. They reverse-engineered the app, described the formal cryptographic protocols, and provided theorems establishing the security guarantees that WhatsApp provides. Overall, they gave the messenger a clean bill of health, finding that it works securely and as described by WhatsApp.

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Shares of AppLovin (NASDAQ: APP), an adtech company, spiked by 12.4% this week, according to data compiled by S&P Global Market Intelligence, after the company reported better-than-expected revenue and earnings and said it would sell its gaming division.

The sale will not only generate cash for AppLovin, but allow the company to focus more on its adtech business, which is the company's fastest-growing segment.

Where to invest $1,000 right now? Our analyst team just revealed what they believe are the 10 best stocks to buy right now. Learn More »

Investors may also be responding to the AppLovin CEO's blog post expressing interest in merging with TikTok Global (for assets outside of China). No official deal has been announced, and the company said the move is admittedly "a long shot."

Image source: Getty Images.

Investors are lovin' the company's momentum

AppLovin reported earnings per share of $1.67 in the first quarter (which ended March 31), up 149% from the year-ago quarter and ahead of Wall Street's consensus estimate of $1.45. The company's revenue of $1.48 billion also outpaced analysts' average estimate of $1.38 billion and was a 40% increase from the year-ago quarter.

Sales from the company's important advertising segment were also impressive, rising 71% in the quarter to $1.16 billion. The company's apps revenue declined by 14% to just $325 million.

But investors weren't worried about the company's app revenue decline because AppLovin announced that it's selling its mobile gaming business to Tripledot Studios. The move will give AppLovin $400 million in cash, a nearly 20% ownership stake in Tripledot, and allow the company to leave its apps business behind and focus its attention on advertising. The deal is expected to close in the second quarter.

A moonshot move

As if it weren't a big enough quarter already for AppLovin, the company's CEO Adam Foroughi wrote in a blog post yesterday that his company is pursuing TikTok Global in an effort to merge with the company, specifically for all assets outside of China.

The company said it's pursuing a merger, not a buyout, and that the combined company could boost TikTok's annual revenue from its current ad revenue of $20 billion and help it reach $80 billion annually.

But investors should know that AppLovin admits the merger proposition is a long shot. Foroughi said:

Let's be clear: this is a long shot. But building one of the world's best advertising AI models was also a long shot, yet we did it. We're not here for small bets. Our goal is to build a massive business that creates value for the world and our shareholders.

Investors should be pleased with the company's latest results and the sale of its gaming division. The company is focused on its expanding its ad business and, without or without a TikTok deal, AppLovin appears to be on the right track.

Don’t miss this second chance at a potentially lucrative opportunity

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On rare occasions, our expert team of analysts issues a “Double Down” stock recommendation for companies that they think are about to pop. If you’re worried you’ve already missed your chance to invest, now is the best time to buy before it’s too late. And the numbers speak for themselves:

• Nvidia: if you invested $1,000 when we doubled down in 2009, you’d have $303,566!*
• Apple: if you invested $1,000 when we doubled down in 2008, you’d have $37,207!*
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Chris Neiger has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends AppLovin. The Motley Fool has a disclosure policy.

A jury has awarded WhatsApp $167 million in punitive damages in a case the company brought against Israel-based NSO Group for exploiting a software vulnerability that hijacked the phones of thousands of users.

The verdict, reached Tuesday, comes as a major victory not just for Meta-owned WhatsApp but also for privacy- and security-rights advocates who have long criticized the practices of NSO and other exploit sellers. The jury also awarded WhatsApp $444 million in compensatory damages.

Clickless exploit

WhatsApp sued NSO in 2019 for an attack that targeted roughly 1,400 mobile phones belonging to attorneys, journalists, human-rights activists, political dissidents, diplomats, and senior foreign government officials. NSO, which works on behalf of governments and law enforcement authorities in various countries, exploited a critical WhatsApp vulnerability that allowed it to install NSO’s proprietary spyware Pegasus on iOS and Android devices. The clickless exploit worked by placing a call to a target's app. A target did not have to answer the call to be infected.

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• Michelle Kloese, 42, gained weight from early menopause and a stressful job.
• When she started a new job, she joined a health app paid for through work.
• Walking every day, logging her water intake, and meal swaps helped her lose over 60 pounds.

At 40, Michelle Kloese felt like she didn't recognize her body. In five years, she gained 38 pounds and developed high cholesterol, high blood sugar, and plantar fasciitis, a kind of foot pain caused by inflammation.

She didn't always feel like this. In her 20s, running was her main form of exercise, and she loved 5K races. Her body started to change in her mid-20s, when she experienced symptoms of early menopause, like infertility. By her 30s, bloodwork confirmed she had perimenopause, around 15 years earlier than most women.

Then, in her mid-30s, she started a demanding job as a middle school assistant principal, often starting before the school day and wrapping up after school hours. With less time to work out, a busy schedule, and irregular meals, she started to snack more.

"Somebody would leave a cupcake on my desk, so I'd eat that, or parents would bring in a basket of candy," Kloese, now 42, told Business Insider.

The change in her body really struck her after a surprise trip to Ireland for her 40th birthday. "I looked at the pictures and went, 'Oh gosh, I need to do something different,'" she said.

She had just started a new, less stressful edtech job, Kloese learned about a health app, Personify Health, connected through their insurance. The timing was perfect: she signed up, logging her steps and water intake.

She lost 38 pounds in the first year and 23 pounds the following year. Now she's in a "weight maintenance" phase, seeking to stay within a few pounds of her current weight.

"I have so much more energy — I'm not as sluggish and tired as I was feeling all the time," she said. The issues related to her weight, like high cholesterol and high blood pressure, also went away. "I have just felt a whole lot better."

Kloese shared the three habits she started and still maintains to keep the weight off.

She woke up to a full glass of water

Before, Kloese didn't drink much water — sometimes, she'd only remember to have around eight ounces of the recommended eight cups in one day. "That's one of the most challenging ones for me to do," she said.

Her goal was to get to at least 72 ounces, or nine cups per day.

Tracking her intake helped. The first thing she did every morning was drink a full, 8-ounce glass of water and log it in the app. For the rest of the day, she'd log in "steady sips", using a marked water bottle to measure her progress. It was more manageable for her to track two ounces at a time rather than feel pressure to chug a lot of water at once.

Drinking water helps with weight loss by curbing your appetite. It can also help you reach a calorie deficit if you swap it for high-calorie drinks like soda.

She swapped running for walking and yoga

While she used to run a lot in her 20s, Kloese's knees and hips hurt when she tried in her 40s. She knew she needed to try something different.

When she first made a plan to lose weight, Kloese communicated with a personal trainer through an app. The trainer said that, in her 40s, it was important for Kloese to focus on strength training as we naturally lose muscle with age. Muscle-building can also help with weight loss — gaining muscle boosts your metabolism and burns fat.

Kloese started doing at-home and online circuit workouts 3-4 times a week with light weights.

The rest of the time, she walked. She took part in a fitness challenge of walking 30 minutes a day. Weight-loss-wise, she said she saw about the same results as running.

Now, she aims to walk at least 7,000 steps a day, whether on her walking pad or on trails near her home in Florida. Occasionally, she trains for Mammoth Marches, 20-mile hikes all over the country.

She also swapped out some of the strength training with yoga, which relaxes her while still improving her strength and flexibility.

Being more active transformed her relationships with her friends. "Before, where we might've just picked a restaurant to hang out at, instead, we go out and do a hike," she said.

She made simple meal swaps

Despite snacking on sugary treats at her old job, Kloese isn't much of a sweets person. "I was a pasta-potato-bread kind of person," she said. Still, she wanted to make some more nutritious swaps.

Through the KickStart app, she logged her meals by taking photos of them. If she got a burger and fries, the app suggested lower-carb sides for next time, like a side salad or sweet potato wedges.

Eventually, she naturally made those swaps on her own, like cooking quinoa instead of white rice. She also gets pre-made meals through Factor, which she said helps her with portion control and eating a balanced diet when she's busy.

"Those were all small changes that evolved over time," she said.

Tech stocks have taken investors on a wild ride in 2025, with tariffs, interest-rate jitters, and a new presidential administration fueling market volatility. But while many are running for the exits, savvy investors know that short-term chaos can create long-term opportunity.

Here are a few of those stocks -- trading at significant discounts -- that are worth a closer look while Wall Street catches its breath.

Where to invest $1,000 right now? Our analyst team just revealed what they believe are the 10 best stocks to buy right now. Continue »

1. AppLovin

AppLovin (NASDAQ: APP) provides technology and tools to help mobile app developers effectively market, monetize, and grow their apps. The stock trades recently traded around $270 per share and has increased by more than 300% since its initial public offering in 2021.

Yet the stock is down roughly 23% in 2025, in part due to the investigative investment firm Muddy Waters Research releasing a short report on the company claiming that AppLovin appears to be violating the platforms' terms of service. As a result, Muddy Waters believes AppLovin could lose business to competitors, claiming a 23% client churn rate in the first quarter 2025.

AppLovin CEO Adam Foroughi pushed back against the short report, describing it as "littered with inaccuracies and false assertions." Foroughi emphasized that the company operates in full compliance with App Store policies and stressed that its business is "based on transparency and integrity."

AppLovin delivered strong financial results in 2024, generating $4.7 billion in revenue and $2.1 billion in free cash flow -- marking year-over-year increases of 43.4% and 100%, respectively. The company has been putting its free cash flow to work by buying back stock, reducing its shares outstanding by 10% over the past three years. As of the end of 2024, it still has $2.3 billion remaining under its share repurchase program.

APP Price to Free Cash Flow data by YCharts

AppLovin's valuation may look steep at first glance -- trading at 43.6 times free cash flow -- but high multiples are par for the course in the world of tech and growth stocks, where investors pay for future potential. What makes AppLovin stand out is its rapid growth: With free cash flow doubling in 2024, the premium looks far more palatable. Plus, the stock is currently trading about 50% below its peak price-to-free cash flow multiple, making this high-growth company look like a bargain.

2. Nvidia

Arguably, at this stage of the artificial intelligence (AI) boom, Nvidia (NASDAQ: NVDA), a chip supplier, has been the largest beneficiary. It provides the ecosystem of software and materials to support AI development. After its stock skyrocketed over the past few years, Nvidia briefly became the world's most valuable publicly traded company.

Since then, the stock has cooled to $104 per share, falling more than 30% from its peak of $153 per share. Despite the price fluctuations, the business is humming along.

In fiscal 2025, Nvidia generated $130.5 billion in revenue and $72.9 billion in net income, representing an incredible increase of 114% and 145%, respectively, compared to fiscal 2024.

One reason for the recent dip in Nvidia's stock is growing uncertainty around tariffs, which could pressure the company's high gross margin. Nvidia's gross margin, a key indicator of cost efficiency and pricing power, stood at 78.4% in fiscal Q1 2025, but management expects it to decrease to between 70.6% and 71% in fiscal Q1 2026. If that projection holds, it would mark the fourth consecutive quarter of margin contraction.

Addressing the issue during the company's February earnings call, CFO Colette Kress acknowledged the uncertainty around tariffs, saying, "It's a little bit of an unknown, it's an unknown until we understand further what the U.S. government's plan is, both its timing, it's where, and how much."

For a mature company like Nvidia, the price-to-earnings (P/E) ratio remains a widely used valuation tool, measuring a company's stock price relative to its earnings over the past 12 months. Currently, Nvidia trades at 35.6 times trailing earnings -- a figure that might seem steep to traditional value investors. However, when considering the forward P/E ratio, which reflects expectations for the next 12 months of earnings, the valuation appears far more attractive at 23.6 times earnings.

NVDA PE Ratio (Forward) data by YCharts

Looking further ahead, Nvidia CEO Jensen Huang's long-term optimism surrounding the AI revolution helps support the company's valuation. On the company's most recent earnings call, Huang outlined a sweeping vision for the role of AI, stating:

Every fintech company will [use AI]. Climate tech companies use AI. Mineral discovery now uses AI ... every higher education, every university uses AI, and so I think it is fairly safe to say that AI has gone mainstream and that it's being integrated into every application.

Are these discounted tech stocks worth buying?

Whenever the market turns turbulent, growth stocks are often the first to take a hit -- and that's exactly what investors are seeing now. Both AppLovin and Nvidia have delivered explosive growth in recent years, resulting in premium valuations. But with the latest pullback, investors finally have a rare chance to scoop up shares at far more reasonable prices. Given the long-term tailwinds behind mobile advertising for AppLovin and the surge of AI for Nvidia, this moment of market uncertainty could end up being a prime opportunity for investors who can look beyond the next few quarters and focus on the long term.

Don’t miss this second chance at a potentially lucrative opportunity

Ever feel like you missed the boat in buying the most successful stocks? Then you’ll want to hear this.

On rare occasions, our expert team of analysts issues a “Double Down” stock recommendation for companies that they think are about to pop. If you’re worried you’ve already missed your chance to invest, now is the best time to buy before it’s too late. And the numbers speak for themselves:

• Nvidia: if you invested $1,000 when we doubled down in 2009, you’d have $276,000!*
• Apple: if you invested $1,000 when we doubled down in 2008, you’d have $39,505!*
• Netflix: if you invested $1,000 when we doubled down in 2004, you’d have $591,533!*

Right now, we’re issuing “Double Down” alerts for three incredible companies, available when you join Stock Advisor, and there may not be another chance like this anytime soon.

See the 3 stocks »

*Stock Advisor returns as of April 21, 2025

Collin Brantmeyer has positions in Nvidia. The Motley Fool has positions in and recommends AppLovin and Nvidia. The Motley Fool has a disclosure policy.

In a week of market volatility, the adtech sector was on fire this week after a down week to start April. The recovery is no surprise, as investors got a bit of good news from the Trump administration -- at least relative to what we knew a week ago.

According to data provided by S&P Global Market Intelligence, shares of AppLovin (NASDAQ: APP) were up as much as 19.9%, Reddit (NYSE: RDDT) jumped 17%, and Spotify (NYSE: SPOT) was up 12.7%. The stocks were up 13.9%, 15.1%, and 8.4%, respectively, for the week on Friday at 3:10 p.m. ET.

Where to invest $1,000 right now? Our analyst team just revealed what they believe are the 10 best stocks to buy right now. Learn More »

Tariffs delayed

The announcement on Wednesday that tariffs on most countries around the world would be delayed by 90 days was met with wild enthusiasm by the market. Stocks shot up across the board, and that included a lot of tech companies and those who benefit from consumer spending and advertising, like AppLovin, Reddit, and Spotify.

To be clear, the news isn't all good. The 10% tariff across the board is still in place, and the tariff on goods from China is 125% or more, depending on the time of day. Compared to the start of the month, tariffs are up, but the market is happier today than it was a week ago.

Advertising wins?

If a recession, which seemed extremely likely on a week ago, is avoided, it would be a boost to advertising companies, because consumers will be spending on more goods, and so will advertisers. That's part of the reason these companies rose so much this week.

But there may still be headwinds. The companies advertising on these platforms have costs, and if their costs are going up because of tariffs, it may leave less money for customer acquisition on advertising platforms. On top of that, there's still a very real possibility of a recession this year.

Higher costs across the board

The other two factors to layer in are rising interest rates and a falling dollar. A lower dollar makes it more costly to import goods from other countries -- and that's on top of the tariff impact.

Higher interest rates make it more costly to do everything from borrowing to start a business to buying a home. Higher rates are generally an indicator of slower growth, so that could be a headwind for the market.

More uncertainty ahead

While this week was generally positive compared to last week, investors aren't out of the woods yet. It's not yet clear if the 90-day pause on wider tariffs will lead to deals, or if higher costs are only put off for a few months. Then there's the China tariffs, which are currently at 145%, but seem to change by the minute.

The market doesn't know what to expect, and that's part of the problem. What we do know is that consumer sentiment is falling, and it's likely we will see inflation pick up later this year. That alone could be a reason for caution for companies counting on higher advertising spending to grow their revenue in 2025.

Should you invest $1,000 in AppLovin right now?

Before you buy stock in AppLovin, consider this:

The Motley Fool Stock Advisor analyst team just identified what they believe are the 10 best stocks for investors to buy now… and AppLovin wasn’t one of them. The 10 stocks that made the cut could produce monster returns in the coming years.

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See the 10 stocks »

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Travis Hoium has positions in Spotify Technology. The Motley Fool has positions in and recommends AppLovin and Spotify Technology. The Motley Fool has a disclosure policy.