Title: Nvidia's Q2 Earnings Report Could Impact Big Tech Stocks, Barclays Strategists Say
In a recent note, Barclays strategists highlighted Nvidia's upcoming earnings report as a potential catalyst for Big Tech stocks amidst rising cross-asset volatility. Concerns about AI spending have been impacting equities, and investors are closely watching Nvidia's Q2 earnings on August 28 to gauge the fate of the Big Tech vs. rotation trade.
While AI-related capex from Tech giants has been strong, there are concerns about high spending versus actual AI revenues materializing. Barclays views the recent drop in European tech stocks as potentially overdone, leading them to re-enter the sector with an overweight position.
The investment bank prefers the long-term growth potential and quality aspects of the tech sector compared to struggling sectors like Autos. Sharp equity market movements have been exacerbated by the de-grossing of leveraged positions among systematic investors, particularly in low-yielding Japanese yen carry trades.
Following the Bank of Japan's rate hike and soft U.S. employment data, the rate differential has shifted in favor of Japanese assets, leading to a pullback in liquidity-driven markets. Barclays' FX team suggests that yen weakness may resume once market positioning stabilizes, but further appreciation is possible if a global rate-cutting cycle accelerates due to a recession.
Despite potential erratic price action and elevated volatility, Barclays strategists believe that recent indiscriminate selling is excessive and see buying opportunities for long-term investors.
Analysis:
Barclays strategists believe that Nvidia's Q2 earnings report could have a significant impact on Big Tech stocks and the broader market. They are closely monitoring AI spending and its effect on equities, as well as the recent pullback in European tech stocks. The bank sees potential buying opportunities in the tech sector for long-term investors, despite the current market volatility and concerns about yen carry trades. Overall, they remain optimistic about the growth potential of the tech sector and recommend a cautious approach for investors in the current market environment.