Good morning investors,
A blockbuster night for Big Tech has reignited confidence across markets. Microsoft and Meta both delivered top- and bottom-line beats, shaking off tariff headwinds and economic concerns. With both companies citing resilient demand — particularly for AI and cloud services — investors are reassessing just how fragile this environment really is. As we head into Thursday’s key earnings from Apple and Amazon, sentiment has shifted sharply. The AI trade looks alive and well.
Meanwhile, yesterday’s negative GDP print adds fuel to the debate over whether we’re facing a true downturn or just a temporary trade-driven slowdown. I maintain that this is a growth scare — not a recession. And with tech now showing signs of renewed leadership, the bar for disappointment may be higher than the market had assumed.
Pre Market Action
Markets are rallying in early trading on the back of strong results from Microsoft and Meta. S&P 500 futures are up 1.2%, with Nasdaq futures leading the charge at +1.8% as Big Tech recovers lost ground. Dow futures are also in the green, up around 0.8%. The tone has turned positive following a month of volatility, with investors now looking to Apple and Amazon to sustain momentum. Oil prices remain soft, gold is falling, and the dollar is firmer — all pointing to a modest return in risk appetite.
Corporate Earnings Focus: Microsoft and Meta Lead the Rebound
Microsoft delivered a standout quarter, with Azure revenue up 33% — well above consensus. Importantly, AI accounted for 16 percentage points of that growth, showing acceleration from the previous quarter. The company guided to even stronger cloud performance next quarter, forecasting 34–35% growth. EPS of $3.46 beat estimates of $3.22, and total revenue came in at $70.1 billion. CEO Satya Nadella emphasized enterprise demand for AI remains strong, and investors rewarded the results with an 8% after-hours jump.
Meta Platforms also impressed, beating revenue and profit expectations and raising its capex guidance to between $64 billion and $72 billion — a clear sign it’s going full speed on AI investment. Q1 revenue hit $42.3 billion (vs. $41.4B expected), and EPS came in at $6.43, handily above estimates. The company also guided Q2 revenue to a range above the Street’s midpoint. It’s now clear Meta is treating AI as a platform shift, not a side project.
Together, these two results reset the tone. AI spend is holding. Enterprise demand hasn’t cracked. And guidance is not just steady — it’s constructive. This tees up the next key event: Amazon and Apple earnings later today.
AI Growth Story Continues
The tech trade has fundamentally shifted, propelled by Meta and Microsoft's stellar Q1 earnings, which confirm a truth I've been championing for months: AI spending is not just resilient—it's accelerating at full steam. Google's earnings were the first signal, but now we have concrete proof.
Microsoft's Azure crushed expectations with 50% cloud revenue growth, driven by insatiable AI demand, while Meta doubled down, boosting its AI CapEx to a projected $35B for 2025. These results underscore the secular growth narrative I've long emphasized, and I anticipate Amazon's AWS to deliver equally impressive numbers next, further validating this unstoppable trend.
The earnings calls were a critical litmus test—if tech giants were going to pull back on AI investments, this was their moment to signal caution. Instead, they leaned in, showcasing a resilience that silences doubters. This conviction fuels my belief that we're in the early stages of a multi-trillion-dollar AI industry, with leading companies poised to pour ever-increasing capital into this transformative technology.
Software stocks, particularly those in the IGV index like Salesforce, ServiceNow, and Adobe, which I recently highlighted, are set to sustain their robust performance as AI integrations deepen. For those who heeded my call to buy Nvidia below $100, the rewards have been substantial, with the stock soaring as AI's backbone.
Yesterday's results from Meta and Microsoft dismantle any lingering fears of a growth slowdown, reinforcing my thesis from April's sell-off that tech is primed for a powerful rebound. The AI movement is charging forward, and this is no time to sit on the sidelines—stay positioned for the next leg of this historic rally and keep a close eye on AWS earnings for further confirmation.
Macro Focus: Growth Scare Confirmed, But Not Crisis
First quarter GDP came in at -0.3%, marking the first contraction in three years. Imports surged, tariffs distorted trade flows, and consumer confidence wobbled. But this backward-looking data doesn’t capture the April 2 “Liberation Day” reprieve or any second-quarter stabilization. Inflation also surprised slightly to the upside, making the Fed’s job harder.
Still, I think we need to separate noise from signal. This was not a broad-based collapse in activity — it was a tariff-led drag. As we saw with Meta and Microsoft, corporate earnings are not falling off a cliff. If Apple and Amazon can hold the line, the market may look through this GDP print as an anomaly.
Tariffs and Political Watch
Trump’s administration continues to send mixed messages on trade. While talks with India appear to be progressing, tensions with Europe and China remain unresolved. Still, companies like GM received some clarity this week, updating guidance to reflect a $4–5B tariff impact — less than feared.
Meanwhile, Amazon has reassured the White House it won’t highlight tariff-related costs at checkout. Apple, however, remains exposed, with ongoing scrutiny over its App Store policies and a looming shift in iPhone production due to tariff risks.
Analyst Recommendations
Albertsons: JPMorgan raises target to $31 from $24.
eBay: Piper Sandler hikes target to $74 from $70.
Meta Platforms: Pivotal Research cuts target to $830 from $875 amid higher investment spend and macro risk.
Microsoft: D.A. Davidson lifts target to $500 from $450 after strong Azure growth.
Robinhood: KBW raises target to $47 from $43.
Final Thought
The tech trade has changed. Microsoft and Meta didn’t just deliver solid numbers — they reaffirmed the secular strength of AI. If there was ever a quarter to cut spending, it was this one. But instead, both companies doubled down. Azure crushed expectations. Meta raised capex. This is not a momentary blip — it’s a structural trend.
I’ve said for a while this was a growth scare, not a recession. These results back that view. Google hinted at it first, now Microsoft and Meta have confirmed it. And I expect AWS to follow. This is a multi-trillion-dollar industry in the making. Those who listened when I flagged Nvidia below $100 or highlighted software strength in IGV are now seeing that thesis unfold.
The market will still be volatile, but the AI investment cycle is intact. And as long as it is, Big Tech will remain the engine of this market.
Please feel free to reach out to me on LinkedIn or by email if you would like help navigating this market environment or have any planning-related questions.
Dan Sheehan [email protected]
This newsletter is for informational purposes only and should not be considered as investment advice. Please consult with your financial advisor about your specific situation.