This week, tech giants including Amazon (AMZN) and Microsoft (MSFT) will report their latest quarterly earnings, and investors will be closely watching the results following mixed results from Tesla (TSLA) and Alphabet (GOOG, GOOGL).
Bryant VanCronkhite, Senior Portfolio Manager at Allspring Global Investments, joins Wealth! to share his insights on upcoming tech revenues for big tech companies and what investors should keep in mind going forward.
Van Cronkite explained that while AI trading is driving the market rally, so far the progress hasn’t shown up much in quarterly earnings reports, leaving some investors wondering when that will happen.
Regarding the technology sector and the rotation into small caps that the market has seen in recent weeks, Van Cronkite said, “I’ve been calling for this value rotation for the last few weeks and it’s starting to work. This move could continue and makes a lot of sense. Money is concentrated in a narrow market and it only gets there for one of two reasons. You either get there out of greed and exuberance, as we saw with the AI trade, or you get there out of fear. When you’re worried about the economy as a whole, when you’re worried that maybe the Fed is slow to act and we’re going to have a recession, you want to funnel more and more capital into a few of the hottest companies.”
He continues: “Both fear and greed have pushed capital into narrow markets, but that will eventually be resolved. And I think sobering inflation numbers give the market confidence that the Fed can start to act, giving us a chance to avert a shrinking recession. That will then create a natural rotation out of concentrated stocks and into value stocks and the broader market.”
For more expert insights and the latest market trends, click here to watch this full episode of Wealth.
This post was written by Nicholas Giacobino