Big techs exceed expectations amid tariff uncertainty

Amid a volatile market environment driven by the U.S.–China trade war and surprising earnings results from tech giants, companies are navigating a challenging landscape. In this edition, Niraj Patel, Chief Equities Strategist at Banco Itaú International, analyzes the technology sector, focusing on the performance of the Mag7 and the outlook moving forward.

Main highlights:

• Tariff Impact: Market volatility sparked by tariff-related news led to a significant correction in equity markets, including the tech sector. However, Trump’s temporary suspension of some tariffs triggered a swift rebound, underscoring the market’s sensitivity to political and economic decisions.
• Surprising Earnings: Despite ongoing uncertainty, U.S. tech companies reported strong results. Netflix, Alphabet, Microsoft, and META exceeded expectations, demonstrating resilience in their core businesses and confidence in the future perspectives. This highlights the tech sector’s ability to adapt and innovate amid economic challenges.
• Investments in Artificial Intelligence: META surprised the market by increasing its investment plans for 2025, raising its spending forecast from $60–65 billion to $64–72 billion, with a focus on artificial intelligence. This move boosted the shares of data center-related companies like Constellation Energy and Nvidia, reflecting growing interest and potential in AI across the market.
• Apple’s Challenges: Among the major tech players, Apple delivered the weakest results. While short-term tariff impacts remain limited, upward pressure is expected to increase throughout the year. This underscores the complexity of the global landscape and the specific challenges faced by companies with international supply chains.
• Events: Google’s developer conference, I/O, and the expansion of Alphabet’s autonomous vehicle services to new cities are seen as potential stock catalysts. These developments led to Alphabet’s inclusion in the Top Picks list, despite long-term concerns about Google Search’s market share in the age of AI.
• Portfolio Strategy: The AMS Equity portfolio adopted a more active approach to manage volatility, using cash levels as a strategic tool. Initially, cash was raised to 17% following tariff news and later partially redeployed to increase exposure to preferred companies as positive earnings reports were released.