(Bloomberg) — Investors in the US technology behemoths that dominate the S&P 500 Index are breathing a sigh of relief as last week’s earnings reports from the group show their outlooks remain mostly strong in the face of President Donald Trump’s shifting trade policies.
One after another, tech giants from Amazon.com Inc. to Microsoft Corp. unveiled forecasts that suggest demand remains largely intact for businesses including electronic devices, cloud computing services, software and digital advertising. While the reports were by no means perfect — Apple Inc. was a high-profile disappointment — they eased many of the worst-case fears that the firms would signal a tariff-induced profit slump was on the immediate horizon.
It was an encouraging stretch for investors seeking signs that the stock market’s rebound potentially has legs. The tech-heavy Nasdaq 100 Index took its two-week rally to 10% and is now almost 3% above where it closed on April 2, before Trump unleashed tariffs on virtually all of America’s largest trade partners. Microsoft led gains in the so-called Magnificent Seven megacaps, with its best week in more than two years.
“A lot of investors were braced to hear things that were very grim,” said Mark Luschini, chief investment strategist at Janney Montgomery Scott. “Even numbers that were a little weak were far from the worst-case scenario. That’s allowing the market to take a glass-half-full view, even though the situation remains foggy, and the rebound could be jeopardized by any emerging signs of a slowdown.”
Of course, the threat of renewed volatility hangs over the tech giants as the trade war drags on. It will also take until the next earnings cycle to see how the sector actually performed once Trump’s levies took effect. Until the picture is clearer, Luschini said he’s avoiding big sector bets and holding defensive shares, along with tech stocks linked to long-term growth trends.
Big Tech companies have been at the center of the selloff in US stocks that’s shaved about 3% off of the S&P 500 this year as traders pocketed profits on the cohort and shifted into defensive assets. The worry is that tariffs will fan inflation and stifle economic growth. The market got some reassurance on Friday from a strong jobs report, as well as hints of possible trade talks between the US and China.
Still, the underlying uncertainty has caused companies including airlines, shoemakers and retailers to withdraw forecasts and take a cautious approach to spending. Most of the tech giants bucked that trend.
Of the six Magnificent Seven companies that have reported, four gave revenue forecasts that were either roughly in line or exceeded Wall Street estimates. Google parent Alphabet Inc. kept with tradition and didn’t provide one. Nvidia Corp., the last to report, is scheduled to announce results on May 28.
Microsoft’s revenue forecasts for the current quarter topped expectations thanks in part to strength in its Azure cloud-computing business, where demand continues to outstrip its data center capacity. Amazon’s operating profit outlook was weaker than expected, but Chief Executive Officer Andy Jassy said it hasn’t “seen any attenuation of demand yet.” Meta offered reassurance about the outlook for digital ad-spending with a forecast that was roughly in-line with analyst estimates.
Spending Leeway
The earnings season has also calmed worries about capital spending on artificial-intelligence computing gear, which has fueled a revenue boom for companies like Nvidia and Broadcom Inc. Meta raised its forecast for capital expenditures this year, and Microsoft said growth in such outlays would slow next year but still rise.
The comments sent shares of chipmakers and computing-hardware makers higher.
“Tech companies are getting more leeway to spend, because they’ve shown it can deliver returns and support growth,” said Hanna Howard, a portfolio manager at Gabelli Funds.
It wasn’t all good news, however. Tesla Inc. backed away from a prior forecast to return to revenue growth in 2025, and Apple said it expects $900 million in higher costs from tariffs in the current quarter. The iPhone maker was hit with at least two Wall Street downgrades, with the analysts citing tariff headwinds and growth concerns.
While profit estimates in many S&P 500 sectors have fallen this earnings season, projections for tech giants are climbing. According to Bloomberg Intelligence, earnings for the Magnificent Seven are seen rising 21.6% in 2025, while revenue is expected to grow 9.7%. Both estimates have risen in the past week.
“There was a lot of concern that we’d see a more drastic pullback, but based on what we’ve seen, things look much better than expected,” Gabelli’s Howard said. “There’s certainly a concern that things could get worse, but for the most part it has been pretty positive.”