Market Insights

Second quarter earnings season has begun. Financials have already reported, and attention will soon turn to major technology companies like Microsoft and Apple. This article will cover some key dates and recent news on these stocks.

Recent News

• Political risk returned this week. Bloomberg reported President Joe Biden may restrict the sale of chip-making equipment to China. Presidential candidate Donald Trump also criticized Taiwan for its prominent role in semiconductors and said the country should pay the U.S. for military protection.
• Meta Platforms (META) faces a potential slowdown in advertising revenue, according to Edgewater Research. The analysts cited weakness in direct-response spending, which they saw spreading in June and early July.
• ASML (ASML), one of the world’s top providers of semiconductor-making gear, reported better-than-expected results thanks to AI demand. Bookings also jumped on strong demand for AI chips. However the stock had its biggest drop in four years amid worries about export restrictions.

• Apple (AAPL) rallied to new highs in June after announcing plans to include AI in iOS. It jumped again on Monday after Bloomberg reported its India sales rose about 33 percent. Loop Capital almost doubled its price target from $170 to $300, citing AI growth potential.
• Morningstar data revealed that active investors sharply increased their exposure to Nvidia (NVDA) in the second quarter. That concentration may create broader risks if the chip stock declines, according to Benzinga.
• Wedbush analyst Dan Ives said AI growth could shift from semiconductors to software companies. He added that AI could provide an “iPhone moment” for Microsoft (MSFT). Ives also expects strong growth from cybersecurity firms.
• Super Micro Computers (SMCI) was added to the Nasdaq-100 after more than tripling since the beginning of the year. SMCI has emerged as a key provider of AI servers.
• AI investment could squeeze profits at large Nasdaq companies by 5-10 percent, according to Barclays Capital. Alphabet (GOOGL), Meta Platforms (META) and Amazon.com (AMZN) could be at risk, according to the report.

Takeaway: AI enthusiasm drove large technology stocks through early July. However some observers now see increased risk as costs rise and political uncertainty grows. Investors may worry about further rotation away from the sector as quarterly results are made public.

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