Sector Focus – Tech

11/05/26 – 18/05/26

This week’s focus: Tech Sector

7-day stock swing – Mag 7:	Price Change	% Change
NVIDIA (NVDA)	+$2.88	+1.31%
Microsoft (MSFT)	+$10.88	+2.64%
Apple (AAPL)	+$5.16	+1.76%
Alphabet (GOOG)	+$6.34	+1.64%
Meta (META)	+$12.35	+2.06%
Amazon (AMZN)	-$4.13	-1.54%
Tesla (TSLA)	-$35.01	-7.87%

Macro drivers:

This week we saw a broad-based tech rally guided by several macroeconomic factors. The US jobs report (outlining 115,000 new payrolls) calmed fears of a labour market softening, which signalled that consumer spending will remain strong enough to support the multi-billion dollar AI ecosystem operated by the Mag 7. Momentum from the April jobs report has allowed investors to continue to shrug off the ongoing tensions in the Middle East, albeit this complacency arguably leaves the market more exposed to a potential conflict escalation and an inflation rebound in the near future. Otherwise the momentum from Google and Microsoft’s highly profitable cloud growth – reported in April earnings – has carried over into mid-May as Wall Street begins to approve of their surging capex.

Top performer – MSFT:

Microsoft’s strategy has long been to act as the backbone of the AI boom. Total cumulative spending towards their OpenAI partnership has exceeded $100bn. This has given Microsoft access to premium OpenAI technology needed to improve Copilot, while also locking in OpenAI as Azure’s largest cloud customer.

Following April earnings, the surging revenue growth of Azure and Copilot were overshadowed by huge infrastructure spending plans. This week’s gain was the product of the market finally digesting the fact that Microsoft capex is not speculative and demand for Azure servers continues to exceed server capacity, as well as the mid-week revelation of Bill Ackman’s new stake in Microsoft. This is a company I am moderately bullish on, and one I am glad to see get the recognition it deserves a few weeks after an erratic expense-fuelled sell-off.

Worst performer – TSLA:

Tesla’s cash engine is of course their building and selling of electric vehicles, however they have pivoted away from a reliance on one-time car sales by scaling systems such as the FSD (Full Self-Driving – currently more supervised than ‘Full’) software which is implemented as a paid subscription for current Tesla vehicles. The long-term objective is to utilise all data collected by the millions of operating cars to train an Artificial Intelligence ‘brain’ which will power both ‘Robotaxis’ and ‘Optimus Robots’.

Sadly it has been one obstacle after another for Tesla this week. Following Musk’s blockbuster visit to Beijing, Tesla were unable to secure any contract enabling the implementation of FSD software in Tesla cars across China. The Model Y price was raised by $1000 which, accompanied by a 27% drop in EV sales (Q1 2026), has built expectations of an even greater near-term decline in car sales. Tesla also hit the ceiling of its five-week price channel, yet was unable to break this technical resistance at $445, causing automated algorithms and swing traders to take profit and sell the stock back to its $400 psychological support level. Add Musk’s dismissed lawsuit against OpenAI to the mix, and it has been a pretty miserable week to be a Tesla shareholder.

Now the fun stuff:

The main story this week involves Amazon and Alphabet, who have both turned to foreign markets as sources of funding to support runaway capex. Big Tech firms have hit $725bn on AI infrastructure spending this year, leaving them with the lowest level of free cash flow in over a decade (FT). With free cash flow low and spending high it is no surprise that Alphabet and Amazon have turned to debt markets to raise capital, but why the move away from Wall Street? Take the $25bn bond sale by Meta earlier this year: a deluge of AI-related debt sales such as this have left US investors ”tapped out” (FT) and demanding higher yields from similar borrowers. Accompany this with the more favourable policy rates in countries like Switzerland (Amazon recently raised $3.6bn here across 6 low-coupon tranches) and the narrative behind both firms’ pivot becomes all the easier to understand. 

While Amazon and Alphabet have targeted similar markets, there is one small difference in their strategies which leads me to believe that Alphabet has a slight upper hand. Earlier this year, Alphabet exploited huge demand in the UK for technology-sector corporate bonds by issuing a rare Sterling 100-year bond, at an extremely low per-annum rate. Given the plummeting free cash flow of Big Tech companies, I find this an excellent move. A major risk in corporate bond issuance is refinancing. If an issuing company struggles with free cash flow when bonds mature, they risk having to refinance them at a higher coupon rate. This risk is completely mitigated in the short term with 100 year bonds given the time they take to mature, and thus Alphabet avoid the risk of facing unnecessarily high borrow rates. Perhaps I am skewed by Alphabet’s unhealthily large position in my portfolio, but I am inclined to back them on this one.