Chips Waver as Big Tech Earnings Begin

Second-quarter earnings season has begun with caution as technology stocks digest historic gains.

Chipmakers that rallied sharply in April and May, like Intel (INTC) and SanDisk (SNDK), have pulled back since mid-June. The profit-taking comes despite a steady flow of positive news at the company level. However expectations for rate hikes by the Federal Reserve have weighed on the broader stock market.

There's also been a new trend of strength in cybersecurity companies like Palo Alto Networks (PANW), Fortinet (FTNT) and Datadog (DDOG) as AI increases demand for protection against hacking. Weakness in the broader software industry previously weighed on the group, but they turned around following strong quarterly results in May and June.

Price action so far this earnings season may reflect anxiety and selling pressure. Taiwan Semiconductor (TSM), for example, slid on strong results and International Business Machines (IBM) had a record drop on weak guidance. Goldman Sachs' Prime Services desk also reported that hedge funds have sold tech stocks in six of the last eight weeks. 

Earnings expectations have remained strong for technology despite those jitters. FactSet calculates that Wall Street's consensus estimates see profits for the sector up 63 percent, led by chipmakers. Tech also led the broader market's growth in the first quarter.

This table provides the timing for select stocks in the group. (Note: All earnings are due after the closing bell on their respective dates.)

Recent News

• Apple (AAPL) has been the top-performing megacap stock this month and is the only large technology company to make a new high in recent weeks. It's also tried to reclaim its former position as the world's most valuable company from Nvidia (NVDA). Citi raised its price target from $315 to $365 on July 13, seeing potential market-share gains. HSBC followed on July 17 with an upgrade from Hold to Buy and a price-target hike for $260 to $366. HSBC cited AI opportunities and strong product growth.
• Meta Platforms (META) has climbed since July 1, when Bloomberg reported it plans to sell its excess computing power as a cloud-based service. The New York Times later said Anthropic was considering becoming a customer. Wedbush Securities also said the addition of a former AWS executive bolsters the story and Hedgeye estimates META shares could reach $1,200 in the next 12-18 months. (They closed at $643.81 yesterday.)
• Intel (INTC) continues to be viewed as a turnaround story. KeyBanc raised its price target from $110 to $155 and Susquehanna went from $80 to $115. The company also planned layoffs at its Data Center Group, which makes server CPUs and custom chips.
• Gene Munster of Deepwater Management expects a significant hardware-upgrade cycle to begin next year as equipment is replaced to support AI. He sees the trend supporting companies like AAPL, HP (HPQ), SanDisk (SNDK) and Western Digital (WDC).
• Advanced Micro Devices (AMD) is hosting its Advancing AI event tomorrow. Jefferies anticipated potential product announcements including CPUs for bigger markets and Bank of America expects server demand to drive strong quarterly results. AMD also plans to ship an AI rack system called Helios to compete with NVDA's Grace Blackwell and Vera Rubin products.

• Mott Capital Management said that credit-default swaps on Oracle (ORCL) debt rose to a multiyear high. NVDA also saw modest deterioration. Separately, Seeking Alpha reported that Alphabet's (GOOGL) newly issued 100-year bond lost about 7 percent of its value. Those headlines suggest that hyperscalers continue to face potential financing strains. 
• Wells Fargo raised its price target on GOOGL from $416 to $438, saying hyperscalers will successfully pass along AI costs. The company earlier faced volatility on reports its Gemini 3.5 Pro model was delayed.
• Microsoft (MSFT) was initiated as Overweight by Morgan Stanley with a $600 target price. The analyst expects stronger monetization of Azure and Copilot.
• Stifel said the Kimi K3 model from China's Moonshot AI could boost demand for cybersecurity and infrastructure names. CRWD, DDOG, PANW, Snowflake (SNOW) and Twilio (TWLO) were listed as potential beneficiaries.

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