On Thursday, Bill Gross, co-founder of Pacific Investment Management (PIMCO), tweeted advising investors to stick to value stocks and avoid tech stocks:

“Stick to value stocks and avoid technology stocks for the time being.”

But just one day later, technology stocks experienced a strong rebound. Thanks to$Microsoft (MSFT.US)$,$Alphabet-A (GOOGL.US)$With strong results, the NASDAQ and S&P 500 both ushered in the strongest weekly performance since November last year.

Understanding complex and confusing macroeconomic data is a big challenge for investors trying to grasp short-term market fluctuations. Last Thursday's report showed that despite slowing growth, consumption and investment metrics remained strong. The strong personal spending data released just a day later was welcomed by market optimists, and on the other hand, raised concerns that inflation might increase.

However, despite the uncertainty at the macro level, money managers are still pushing$S&P 500 Index (.SPX.US)$It rose more than 2.5% this week, continuing to support companies that expect profitable growth over the next few years. On Friday, Gross told the media:

“Technology and growth stocks were previously negatively affected by higher yields, but now the situation has changed.”

After falling 5.4% last week, this week$NASDAQ 100 Index (.NDX.US)$There was a 4% rebound, with the 7 strongest stocks rising 3.3% in a single day on Friday.

Mag 7 tech earnings season: Tesla, Google, and Microsoft are strong, Meta faces challenges

This week, four of the Mag 7 tech companies announced financial reports, including$Tesla (TSLA.US)$, Alphabet, and Microsoft performed well, while social media giant Meta's earnings report was snubbed by the market.

(1) Tesla's strong performance

After Tesla's earnings report was announced, the stock price soared 18% in two days, and the market is looking forward to its leading position in autonomous vehicles and robotics.

$Direxion Daily TSLA Bull 2X Shares (TSLL.US)$ It soared 36% in two days, and the amount of assets under management reached nearly US$850 million.

At the same time,$Consumer Discretionary Select Sector SPDR Fund (XLY.US)$It rose nearly 4% this week, and its shareholding share in Tesla reached 13%, surpassing the 2.8% increase in the S&P 500 ETF Trust Fund (SPY). Its influence can be seen.

(2) Meta is disappointing

On Thursday, Meta of Mag 7 technology stocks announced financial results. Although revenue and profit exceeded analysts' expectations, its outlook for the next quarter disappointed the market, and the stock price fell by nearly 11%.

Furthermore, the company announced that it will increase its investment in artificial intelligence, causing some investors to worry about its profit margins. As a result,$GraniteShares 2x Long META Daily ETF (FBL.US)$It's down 22%. Communications Services SPDR Fund (XLC) did not perform well this week. Its share of Meta is 22%, with little growth compared to the overall market.

(3) Google's market capitalization surpasses $2 trillion

Later this week, Alphabet, the parent company of search giant Google, also released financial reports that exceeded expectations. Revenue and revenue both exceeded analysts' expectations, easing market concerns that its core business might be frustrated by chatbot competition such as ChatGPT.

It is worth mentioning that Alphabet also announced its first dividend payment and stated that it will balance growth and investment in artificial intelligence while expanding profit margins.

The news was quickly warmly welcomed by investors. On Friday afternoon, Alphabet's stock price once rose 12%.$ETF OPPORTUNITIES TR T REX 2X LONG ALPHABET DAILY TARGET ETF (GOOX.US)$It surged 24%.

The rise of Alphabet was also driven by$The Communication Services Select Sector SPDR® Fund (XLC.US)$As a result, about a quarter of the ETF's portfolio was allocated to this stock. The ETF rose 2.7% on Friday, recovering part of the previous day's losses affected by Meta.

(4) Microsoft benefits from AI

Finally, Microsoft, the largest in Mag 7, also supported the market on Friday. The company's revenue and profit for the first quarter exceeded analysts' expectations. In particular, the market reacted enthusiastically to the news that artificial intelligence has had a substantial impact on Microsoft's business.

The year-on-year sales growth of Microsoft's key Azure cloud business accelerated from 28% in the previous quarter to 31% in the current quarter, with 7 percentage points of increase due to artificial intelligence services.

At noon on Friday, Microsoft once rose nearly 2%, helping$The Technology Select Sector SPDR® Fund (XLK.US)$It's up 1.1%.

Investors cheer for big tech companies' AI investment boom — except Meta

Following the release of earnings for the first quarter, global tech giants have recently announced that they will invest heavily in AI over the next few years. However, the market reacted mixed — the stock prices of Microsoft and Google's parent company Alphabet rose as a result, while Meta hit their lowest point in 18 months.

Both Microsoft and Alphabet say large-scale AI investments are to meet growing demand for products. Microsoft's financial director Amy Hood said during the earnings conference call that the company's current demand slightly exceeds supply, which explains its capital investment plan to a certain extent.

In contrast, Meta experienced a drop in stock prices after raising its capital expenditure budget for AI development to $10 billion in 2024. CEO Mark Zuckerberg warned that it would take years of large-scale investments to see tangible returns:

“I also expect to see a multi-year investment cycle before we fully expand Meta's artificial intelligence, commercial artificial intelligence, etc. to profitable services.”

Rishi Jaluria, an analyst at RBC Capital, notes that investors are becoming more cautious about the company's AI spending plans and want to see a clear path to profit. He stated:

“If a company does not have a clear strategy but invests on a large scale, this causes concern in the market.”

Microsoft said its quarterly spending on AI was $14 billion, and that number is expected to increase over the next few quarters. The company also showed evidence of return on early investments, such as the quarterly revenue growth of the Azure cloud computing business by 7 percentage points, which was largely due to the use of its AI services.

Ruth Porat, chief financial officer of Google's parent company Alphabet, said artificial intelligence is transforming Google's cloud services, search, YouTube, and other services. She pointed out that the company's capital expenditure for the first quarter was $12 billion and is likely to remain at this level or higher.

However, Meta's statement failed to attract investors, and its share price fell 11% the day after announcing increased spending. Zuckerberg acknowledged that some investors may be unhappy with the company's spending plans.

Technology companies are in an infrastructure construction competition unprecedented since the internet bubble to develop products and services that can use artificial intelligence, and this requires huge costs. Since this new technology requires more computing power, energy, and expensive chips, construction costs are high.

Some observers have compared the current investment cycle in artificial intelligence to the fanaticism of telecom companies over building fiber-optic networks more than 20 years ago.

However, AllianceBernstein's portfolio manager Lei Qiu said in a recent report:

“Unlike many companies in the era of the Internet bubble, the large companies behind the current expansion of cloud infrastructure are already profitable... Today's profitable artificial intelligence giants spend mainly on cloud infrastructure to improve efficiency.”

Editor/Somer