Tech has had an impressive rebound so far this quarter, with semiconductors leading the charge. Now, investors are hoping mega-cap tech can help further fuel the breakout, as Amazon.com Inc. (AMZN), Apple Inc. (AAPL), Microsoft Corp. (MSFT), Meta Platforms Inc. (META), and Alphabet Inc. (GOOGL) all report earnings this week, notes Bret Kenwell, US investment analyst at eToro US.
Together, those companies account for roughly $15.8 trillion in combined market cap. The S&P 500 Index (^SPX) fell 4.6% in Q1, marking its worst quarter since Q3 2022, with tech among the market’s bigger liabilities.
VanEck Semiconductor ETF (SMH)
In fact, tech had already sat out the rally before geopolitical volatility picked up, as the Nasdaq 100 failed to join the Dow, S&P 500, and Russell 2000 in notching new highs in late January and early February. By the first-quarter lows, six of the Magnificent Seven stocks were in bear-market territory, while three of them — Microsoft, Tesla Inc. (TSLA), and Meta — were down more than 30%.
While AI is reinvigorating some parts of the bull market (particularly semiconductors), it’s creating a very different reality for other corners of tech. Investors have continued to sell software stocks on disruption fears, with ServiceNow Inc. (NOW) triggering the latest wave of concern.
From that perspective, there’s a lot of pressure on Microsoft, which is still down more than 20% from its 52-week high, to deliver this week. Not just for itself, but for the software group as a whole.
The question is whether mega-cap tech can help push this rally to new heights. Semiconductors have done much of the heavy lifting this quarter, with the Philadelphia Semiconductor Index climbing more than 47% amid its 18-day win streak – and the VanEck Vectors Semiconductor ETF (SMH) rising nearly 40% from its low on March 30.
There’s clearly powerful momentum behind the group, but even the strongest rallies need time to reset. At some point, semis will likely need a breather — and investors are hoping mega-cap tech earnings can help carry the baton when they do.
