Investors in the US tech giants listed on the S&P 500 Index can breathe a sigh of relief following last week’s earnings reports, which indicate that their outlook remains strong despite President Donald Trump’s trade policies.
Tech companies like Amazon and Microsoft have revealed forecasts that suggest continued demand for electronic devices, cloud services, software, and digital advertising. While not all reports were flawless (Apple disappointed), they alleviated concerns of a profit decline due to tariffs.
The tech-heavy Nasdaq 100 Index has seen a 10% rally over two weeks, surpassing its April 2 closing levels before Trump imposed tariffs. Microsoft led gains in the “Magnificent Seven” megacaps, experiencing its best week in over two years.
Investors were prepared for grim news, but even slightly weak numbers were far from the worst-case scenario. This optimistic view has boosted the market, although uncertainty remains, and a slowdown could threaten the rebound.
The tech giants face volatility as the trade war continues, with the impact of tariffs yet to be fully realized. Until clarity emerges, cautious investment strategies are advised, focusing on defensive shares and tech stocks tied to long-term growth trends.
While US stocks have seen a decline this year, tech companies have stood out despite fears of inflation and slowed economic growth. Positive factors, like a strong jobs report and potential trade talks between the US and China, offer some reassurance.
Most tech giants have maintained or exceeded revenue forecasts, with Microsoft and Amazon showing strength in cloud computing and sustained demand. Meta’s digital ad-spending outlook aligns with analyst estimates.
The earnings season has eased concerns about capital spending on AI computing gear, with companies like Nvidia and Broadcom benefitting. Meta and Microsoft have indicated increased capital expenditures, supporting growth and driving up shares of chipmakers and hardware manufacturers.
Despite some setbacks, tech companies are gaining leeway to invest in growth opportunities, supported by past returns. Profit estimates for tech giants are on the rise, with earnings expected to increase by 21.6% in 2025, and revenue by 9.7%.
While there is a potential for things to worsen, the overall outlook for tech giants is positive, exceeding expectations and indicating a strong performance ahead.
