Quarterly Outlook
Upending the global order at blinding speed
John J. Hardy
Global Head of Macro Strategy
Chief Investment Strategist
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Microsoft, Alphabet, and Meta delivered strong growth across AI and cloud segments. Margins improved, suggesting scalability is kicking in — and AI spending continues to be a rare area of strength despite broader economic uncertainty.
While Tesla's weakness was notable, the rest of Big Tech isn’t showing signs of major demand destruction.
Meta and Alphabet both posted solid ad revenue growth. But as the macro backdrop evolves, this strength could waver, especially if corporate spending tightens. Note that ad budgets are typically among the first to be cut in a slowdown.
Amazon and Apple both cited pressure from rising trade tensions and shifting consumer demand. Their higher exposure to discretionary spending and global supply chains leaves them more vulnerable to policy shocks and economic pullbacks than enterprise-focused peers like Microsoft and Alphabet.
Revenue and margin declines marked a tough quarter, but market attention remains on future-facing developments — particularly robotaxis and a low-cost EV. That leaves Tesla positioned more as a speculative innovation story amid near-term challenges.
Tech companies with global supply chains and retail exposure could face further margin pressure if trade barriers expand.
New U.S. export controls targeting high-end AI chips and compute access may limit growth opportunities in AI infrastructure — particularly outside the U.S. and in markets like India, Saudi Arabia, and Switzerland.
While Q1 was solid, advertising and discretionary spending are sensitive to economic cycles. A slowdown in corporate budgets could directly impact top-line growth for ad-heavy platforms.
Prioritize AI leaders: Microsoft, Alphabet, and Meta appear to be benefitting most from AI and cloud adoption trends. For those looking to tap into the AI infrastructure theme, these companies remain central — though risks include regulation (e.g. AI diffusion rules) and a potential delay in monetization timelines.
Selective approach to consumer tech: Apple and Amazon’s results highlighted vulnerability to tariffs, shifting consumer sentiment, and potential cost pressures. While long-term fundamentals remain strong, near-term performance may depend on trade policy clarity and the resilience of discretionary spending.
Monitor Tesla's innovation trajectory: Tesla’s robotaxi ambitions and EV roadmap could attract interest from investors looking at long-duration innovation plays. However, the company is also contending with falling margins, competitive pressures, and rising political scrutiny.
Diversify across growth and stability: Some may see merit in blending high-growth tech exposure with more stable, cash-generative businesses, especially in light of rising volatility risks around trade, geopolitics, and regulation.
Stay informed on macroeconomic policies: Trade policies, tariffs and regulation are influencing Big Tech's outlooks. Regularly reviewing policy developments can help in adjusting investment strategies promptly.