Whisper it quietly, but Big Tech may be back.
The sector was one of the biggest concerns for investors coming into this earnings season. No, not just the outlook for artificial intelligence, but how it copes with the threat of tariffs and
an economic slowdown. It was, after all, technology firms that led the American exceptionalism trade of the past two years in which the U.S. outperformed everywhere else.
Since stocks peaked, tech has had a
particularly bad run. The Roundhill Magnificent Seven exchange-trade fund is down 20% since its high-water mark on Jan. 24. The broader Vanguard Information Technology ETF has dropped 16% since its top in February. On the other hand, both have recovered more than 10% since troughing earlier in April, according to Dow Jones Market Data.
So is the worst over? Google-parent Alphabet’s earnings indicated it might be. One big positive was that search revenues remain strong. The most revealing expression of confidence is that the company kept its investment targets the same, suggesting it still sees artificial intelligence powering earnings in the future.
We’ll have a better idea after Facebook-parent Meta Platforms, software maker Microsoft, retailer Amazon.com, and iPhone maker Applereport next week. It’s not only trade wars and weaker consumer demand that can hurt these stocks—but also AI and the threat from Chinese rivals such as DeepSeek. High valuations at the start of the year didn’t help, either.
But there’s an equally strong bull case. Software firms, which don’t rely much on physical goods for sales, won’t face a direct hit from import taxes. Plus the tariff outlook could quickly change again, this time for the better—consumer electronics are already exempted.
Even before Alphabet’s results were published, the Nasdaq had enjoyed its third consecutive day of gains greater than 2%. It hasn’t done that since 2001.
The stocks that usually make American markets the envy of the world could be about to
make a powerful comeback.
—Brian
Swint
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Alphabet Beats on Revenue Gains and Solid Profit Margins
Alphabet’s first quarter revenue beat was built on the Google-parent’s Search ads, its third-party ad network, and other segments such as the Google Play store and YouTube subscriptions. The
tech giant reported improved operating profit margins across all its main segments and companywide.
- Cloud revenue jumped 28%, and search revenue rose nearly 10%. YouTube ads revenue rose more than 10%. Overall, Alphabet reported a 12% gain in revenue to $90.2 billion and earnings of $2.81 a share.
- Investors are closely watching Alphabet’s capital expenditures, which it projects at $75 billion for 2025, steady with its previous outlook. It had guided to $17 billion for the first quarter and came in just above that.
- The company is engaged in two antitrust suits with
the Justice Department, both decided in the government’s favor, and the first one is in the middle of a short trial to determine the penalties. It could be forced to sell Google search or share search and ad indexes with competitors.
- Alphabet announced a new share buyback authorization of $70 billion, which at the
first-quarter run rate amounts to about five quarters worth of buybacks.
What’s Next: One of the more promising future sources of revenue is Google’s robotaxi service, Waymo. CEO Sundar Pichai said that Waymo was serving 250,000 passengers a week, up five times from a year ago, and that management was still trying to figure out the business model.
—Adam Levine
Intel Cuts Guidance Blaming Tariffs
Intel faced another setback as it predicted the Trump administration’s tariffs will hurt sales, as it
reported otherwise solid first-quarter earnings late Thursday. Uncertainty around levies between the world’s two largest economies are hurting the already beaten-down chip-maker stock.
- Intel reported adjusted earnings of 13 cents a share, above Wall Street’s consensus 1 cent estimate, according to FactSet. Revenue came in at $12.7 billion, also above analysts’ expectations of $12.3 billion.
- Guidance was disappointing though and the stock fell immediately after the report. Intel now sees revenue ranging between $11.2 billion and $12.4 billion for the current quarter, lower than the consensus call of $12.8 billion. It also projects adjusted EPS of 0 cents, below the 7 cents estimate.
- The soft outlook was mainly driven by customer uncertainty over
tariffs, Intel CFO David Zinsner told Barron’s. He also said tariffs concerns had pulled forward some demand to the March quarter from the June quarter.
What’s Next: Despite tariff exemptions on some imports of Chinese tech hardware products, chips and electronics are expected to be targeted under a new sector tariff that will be announced in coming weeks. Trump has also suggested
the 145% tariff rate on China will “come down substantially,” but said it wouldn’t be completely removed.
—Tae Kim and Elsa Ohlen
U.S.-China Ocean Shipments Slow Dramatically Amid Trade War
President Donald Trump’s tariff war is sharply slowing traffic on a major shipping route between China and the U.S. The pain of a near-standstill in goods shipments could spread from trucking companies to retail shelves in a matter of weeks.
- Ocean container bookings from China to the U.S. fell 64% in the first week of April compared with the week earlier, logistics data platform Vizion said. Overall imports to the U.S. also fell 64%. Imports of apparel, fabrics, and other textiles had the most dramatic drops, Vizion said.
- The rate to ship a 40-foot container between Shanghai and Los Angeles has halved, according to Bloomberg data, implying little demand. In the past week, cancellations of voyages and port calls have also risen, in what maritime analysis firm Sea-Intelligence called a dramatic change.
- Trump imposed minimum tariffs on Chinese imports to 145%, stoking a trade war that has few signs of letting up. China raised its tariffs on U.S. goods to 125%. In recent days, Trump and other administration officials have signaled that they view the disruption as temporary.
- The heads of Walmart, Home Depot, and Target met with Trump this week and warned that the trade war could raise prices and empty shelves, with the disruptions beginning to show in a couple of weeks, Axios reported. The White House didn’t respond to a request for
comment.
