BIG TECH EARNINGS, POWELL SPEAKS THIS WEEK | MARKET OPEN

SUMMARY

Amit Kukreja hosts a comprehensive market open session on April 27th, focusing on the upcoming big tech earnings, the Federal Reserve's anticipated rate decision, and the ongoing rally in semiconductor stocks. The discussion covers geopolitical developments, sector rotations, company-specific news, and broader macroeconomic trends shaping investor sentiment.

MAIN POINTS

• The week opens with anticipation for major tech earnings from Apple, Microsoft, Amazon, and Meta, alongside a continued rally in semiconductor stocks. [1:30]
• Geopolitical updates include Iran offering the US a new proposal to reopen the Strait of Hormuz, with Trump set for a situation room meeting to decide next steps. [7:00]
• Semiconductor stocks surge, with Nvidia, AMD, Intel, and Qualcomm showing strong month-to-date performances, and OpenAI reportedly considering Qualcomm for new hardware. [11:00]
• Market participants debate the sustainability of the semiconductor rally, with some stocks like Poet experiencing sharp declines after order cancellations. [15:00]
• Microsoft stock drops following news of a revised revenue-sharing agreement with OpenAI, raising concerns about the exclusivity of their partnership. [20:00]
• Amazon and Google stocks benefit from the OpenAI news, as investors speculate on increased cloud demand for AWS and GCP. [25:00]
• Intel's earnings highlight a shift in market perception, positioning the company as an AI infrastructure play with strong data center and AI revenue growth. [30:00]
• A poll among viewers shows a near-even split between those excited and those nervous about the rapid semiconductor rally, reflecting market uncertainty. [35:00]
• Non-AI and non-semiconductor stocks face challenges attracting investor attention unless they deliver exceptional earnings results. [40:00]
• The market opens with mixed performance: S&P slightly red, Microsoft and AMD down, while Micron and SoFi show strength. [45:00]
• Micron leads a breakout among semiconductors, while AMD and ARM take a breather after significant recent gains. [50:00]
• Photonics stocks experience volatility, with Poet's order cancellation impacting the broader sector and raising questions about confidentiality breaches. [55:00]
• Software names like ServiceNow and Palantir show resilience, while the broader semiconductor sector faces a sell-off outside of select leaders. [1:00:00]
• Despite a semiconductor pullback, Intel and Micron remain strong, prompting speculation about sector-specific versus broad-based retracement. [1:05:00]
• Meta is identified by multiple AI models as the big tech company most likely to deliver a 10% post-earnings rally due to its growth and valuation. [1:10:00]
• Tesla's recent earnings are critiqued for lacking clear growth updates, with concerns about free cash flow and capex justification. [1:15:00]
• Google reaches an all-time high of $350 per share, validating long-term bullish theses and outperforming other Magnificent Seven stocks year-to-date. [1:20:00]
• Attention turns to the upcoming Wednesday schedule, which includes the market open, the Fed's J. Powell meeting, and big tech earnings releases. [1:25:00]
• Upcoming macro data includes the Bank of Japan's rate decision and the US PCE inflation report, both of which could impact markets after big tech earnings. [1:30:00]
• ServiceNow is increasingly seen as a retail favorite, while Google's new TPUs are expected to support both internal and external AI workloads. [1:35:00]
• Stacy Rasgon of Bernstein discusses the semiconductor rally, noting the unprecedented magnitude of AI-driven growth and structural industry shifts. [1:40:00]
• Goldman Sachs reports that hedge funds are aggressively selling tech stocks, while institutional and retail investors continue to provide inflows. [1:45:00]
• Travel plans and stock draft updates are shared, with expectations for a quieter market in late June and July due to seasonal trends. [1:50:00]
• Poet's order cancellation by Marvell is confirmed, attributed to a confidentiality breach by the CFO, impacting sentiment across photonics stocks. [1:55:00]
• Singapore's strict regulations, including a ban on gum sales, are discussed in the context of upcoming travel and cultural differences. [2:00:00]
• Legal battles between Elon Musk and OpenAI are outlined, with Musk seeking damages and leadership changes over alleged breaches of the original nonprofit mission. [2:05:00]
• Amazon pushes its engineering teams to adopt AI-native practices, aiming to significantly accelerate code release and productivity. [2:10:00]
• Ray Dalio provides a macro perspective, emphasizing that strong earnings are driving markets despite geopolitical tensions and rising oil prices. [2:31:00]
• German political leaders criticize US strategy in the Iran conflict, noting the economic impact on Europe and the need for a resolution. [2:42:00]
• The session closes with lighthearted banter and a word-of-the-day segment, previewing upcoming earnings and market events. [2:45:00]

DETAILED ANALYSIS

The trading week began with heightened anticipation as investors looked ahead to a series of pivotal events, including major earnings reports from technology giants Apple, Microsoft, Amazon, and Meta, as well as a closely watched Federal Reserve decision. The mood was set by a continued surge in semiconductor stocks, with Nvidia, AMD, Intel, and Qualcomm all posting impressive month-to-date gains. The semiconductor rally, now in its 19th consecutive day of strength, has been fueled by robust earnings growth, sector rotation, and the central role of AI in driving demand for advanced chips.

Nvidia approached new all-time highs, while AMD and Micron also demonstrated significant upward momentum. However, the rally's sustainability was called into question, with some market participants expressing concern about overbought conditions, as evidenced by technical indicators such as the 14-day RSI exceeding 85 for the sector ETF. Historical analysis from Goldman Sachs suggested that similar periods of overextension have often led to short-term pullbacks, but ultimately provided attractive buying opportunities for long-term investors.

The session was marked by several company-specific developments. Microsoft experienced a sharp pre-market decline following news that its revenue-sharing agreement with OpenAI would become non-exclusive, sparking worries that OpenAI could shift more business to competing cloud providers such as Amazon Web Services and Google Cloud Platform. This shift was interpreted as potentially reducing Azure's future growth prospects, given the centrality of AI workloads to cloud demand.

Conversely, Amazon and Google stocks saw modest gains on speculation that they could benefit from increased OpenAI partnerships. The OpenAI news also highlighted the evolving landscape of AI infrastructure, with Qualcomm reportedly being tapped to supply chips for potential OpenAI hardware, though skepticism remained about the commercial viability of an OpenAI-branded smartphone in a market dominated by Apple and Google.

The volatility extended to the photonics sector, where Poet Technologies suffered a dramatic 50% intraday decline after Marvell canceled a significant purchase order, citing a confidentiality breach by Poet's CFO. This event triggered a broader sell-off across photonics names, underscoring the fragility of momentum-driven rallies in speculative segments. The incident also raised questions about corporate governance and the importance of maintaining trust with key customers in high-growth technology sectors.

Macro factors played a significant role in shaping sentiment. Geopolitical developments included Iran offering the US a proposal to reopen the Strait of Hormuz, with Trump reportedly set to review next steps in the situation room. Oil prices remained elevated near $97 per barrel, defying expectations that diplomatic progress would ease supply concerns.

The persistence of high energy prices, despite positive headlines, suggested that markets remained cautious about the risk of renewed conflict or supply disruptions. In Europe, German political leaders openly criticized US strategy in the Iran conflict, highlighting the economic toll on European economies and calling for a swift resolution.

The upcoming Federal Reserve meeting and the release of the Personal Consumption Expenditures (PCE) inflation report were identified as key macro events that could influence market direction. Goldman Sachs predicted two rate cuts by year-end, which, if realized, would provide additional liquidity and support for risk assets. The market's resilience in the face of rising oil prices and geopolitical uncertainty was attributed to strong corporate earnings, with 84% of S&P 500 companies reporting positive surprises, well above the 10-year average.

Sector rotation was evident, with capital flowing out of non-AI and non-semiconductor stocks unless they delivered exceptional earnings. Companies like ServiceNow and Palantir demonstrated relative strength, with ServiceNow increasingly viewed as a retail favorite. Meta was singled out by multiple AI models as the big tech name most likely to deliver a significant post-earnings rally, given its attractive valuation and robust topline growth.

Google's performance was particularly noteworthy, reaching an all-time high of $350 per share and outperforming other Magnificent Seven stocks year-to-date. The company's new TPU chips were expected to support both internal AI workloads and external partnerships, including with Anthropic.

Market participants debated the sustainability of the semiconductor rally, with a viewer poll revealing a near-even split between those excited and those nervous about the sector's rapid ascent. Some investors expressed caution, recalling previous episodes where overextended rallies led to sharp corrections. Others remained optimistic, citing the structural paradigm shift driven by AI adoption and the resulting demand for advanced computing infrastructure.

Bernstein's Stacy Rasgon provided historical context, noting that the current cycle of semiconductor growth, fueled by AI, was unprecedented in both duration and magnitude. He emphasized that while some valuations appeared stretched, the underlying demand for AI-related hardware was likely to persist, supporting continued inflows into the sector.

The session also touched on legal and regulatory developments, including Elon Musk's lawsuit against OpenAI, which sought damages and leadership changes over alleged breaches of the original nonprofit mission. The outcome of this high-profile case could have significant implications for OpenAI's ownership structure and future fundraising. Meanwhile, Amazon was reported to be pushing its engineering teams to adopt AI-native practices, aiming to dramatically accelerate code release and productivity across more than 2,100 teams.

Travel and lifestyle topics provided lighter moments, with discussions about upcoming meetups in Chicago and Singapore, as well as the challenges of navigating strict regulations in countries like Singapore, where chewing gum sales are banned. The session closed with a word-of-the-day segment and a preview of upcoming earnings reports from companies such as Amkor, Cadence, and Rambus.

Overall, the market open session reflected a complex interplay of earnings momentum, sector rotation, geopolitical risk, and macroeconomic uncertainty. Investors remained focused on the ability of big tech and semiconductor companies to deliver strong results, while keeping a watchful eye on external shocks that could disrupt the current bullish narrative.

LINKS

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• Amit Kukreja's Instagram profile

KEYWORDS