Barclays strategists said in a note published on Friday that the upcoming NVIDIA earnings report could be the next major catalyst for big tech stocks.
In the midst of various macroeconomic events that have led to increased volatility in assets in recent weeks, concerns about AI spending have weighed more on equities. As such, NVIDIA’s second-quarter earnings on August 28 will be closely monitored, as they “may determine the fate of big tech companies in front of the cyclical nature of trading,” strategists noted.
“While AI-related capital spending from tech giants has been generally strong, investors are beginning to question the high spending as actual AI revenues likely take longer to materialize,” they added.
An exaggerated decrease. Qualifiers
However, Barclays believes that the decline of about 16% in European tech stocks, and the decline of almost 30% in some major players, such as ASML, is likely to be exaggerated. These expectations have prompted them to re-enter European technology stocks with weight gain this week.
The investment bank has expressed a preference for the long-term growth potential and quality aspects offered by the technology sector, in contrast to the cyclical nature of value in other struggling sectors such as automotive.
The recent sharp movements in the stock market have been exacerbated by the cancellation of leveraged trading deals among regular investors. Many leverage deals involved the sale of low-yielding JPY assets to take advantage of the attractive return.
Read also:Reasons behind the rise of the TASI index 0.9% today. The strongest stocks
Japanese Snowball
However, after Japan Bank raised interest rates and weak U.S. employment data, the interest rate spread shifted in favor of Japanese assets, forcing investors out of these swap deals, Barclays strategists explained. This has led to a sharp decline in liquidity-dependent markets.
The bank’s foreign exchange team notes that yen weakness could resume once the market stabilizes and recession fears in the United States recede, but further appreciation of the yen is possible if the global interest rate cut cycle accelerates due to the recession. They noticed a marked drop in yen selling positions ahead of the Japan Bank meeting and expect more closures since then.
Strategists warned that ‘price action may remain erratic due to summer seasonality and high volatility’.
However, they see the recent random sell-off as ‘excessive’ and see more buying opportunities for investors in the long run.
If you have $1,000 are you investing it in NVDA now?
Before you buy shares in NVDA, consider the following:
ProPicks by Investing.com offers investors 6 easy-to-follow model portfolios to build wealth, by identifying which stocks are winning and which are expected to rise. There are over 130,000 subscribers who trust ProPicks in order to find new stocks to buy – using artificial intelligence.
The ProPicks algorithm has just identified the best stocks that investors can buy right now. The selected stocks are expected to yield tremendous returns in the coming years.
