Why the big tech stocks are back in favour
Hear what the market has to say about latest quarterly results, massive spending on AI and hotly anticipated numbers from Mag 7 stocks.
28th October 2026 14:12
by Graeme Evans from interactive investor
A fresh bout of tech sector optimism today boosted Wall Street ahead of the release of results by hyperscalers Microsoft Corp (NASDAQ:MSFT) and Alphabet Inc Class A (NASDAQ:GOOGL) and the latest Federal Reserve decision.
Dealings at today’s opening bell saw the consolidation of last night’s strong position, when the Nasdaq closed 1.2% higher and the Magnificent Seven of mega-cap stocks rallied by 0.9%.
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Tuesday’s gains were strongest among chip firms as the Philadelphia Semiconductor Index jumped 3.6%, led by a 4% rise for second-largest constituent Broadcom Inc (NASDAQ:AVGO) after it unveiled a $63 billion (£47 billion) financing arrangement with leading Wall Street banks.
There was a further boost for the sector during Asia dealings as chipmaker SK hynix Inc ADR (NASDAQ:SKHY) reported a seven-fold jump in quarterly operating profit and said it planned to step up the pace of shareholder returns in the remainder of the financial year.
Its shares surged 11% in Seoul after the company also said it expects memory shortages to continue until at least 2030. The Kospi benchmark rose 6.6% to stand 39% higher year-to-date, despite a significant weakening since mid-June.
Wall Street was earlier cheered by further signs of appetite for financing the AI expansion after Space Exploration Technologies Corp Class A (NASDAQ:SPCX) signed a $40 billion equipment-finance lease transaction and Meta Platforms Inc Class A (NASDAQ:META) increased the size of its equity fundraising to $97.5 billion.
Other notable moves in yesterday’s session include neocloud stocks CoreWeave Inc Ordinary Shares - Class A (NASDAQ:CRWV) and Nebius Group NV Shs Class-A- (NASDAQ:NBIS), with the latter up by 11% amid reports that it has secured funding for data-centre expansion in northern France.
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UBS Global Wealth Management told clients today: “Without commenting on individual companies, we believe AI demand should continue to be a key growth engine.
“The coming days should provide more evidence on the sustainability and monetisation of that demand as hyperscalers release their September-quarter results.”
But while UBS maintains a constructive outlook on the structural growth of the AI theme, it said high expectations and potentially wide differences in company outcomes underscored the risks of single-stock concentration.
For those seeking long-term growth opportunities it recommends investors consider exposure to power and resources and themes relating to ageing populations.
The focus now turns to the results of Microsoft and Google owner Alphabet after tonight’s closing bell, followed by Amazon.com Inc (NASDAQ:AMZN) on Thursday evening.
Saxo Bank said: “Investors will be watching cloud growth, AI spending, margins and free cash flow to determine whether these companies can justify their enormous infrastructure commitments.”
The first two weeks of the Wall Street results season saw quarterly releases by 123 S&P 500 companies accounting for 30% of index earnings.
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Bank of America said 78% beat earnings per share expectations, which was just shy of the 80% beat rate at the same point of the previous quarter and well above the historical post-week two average of 65%.
Its AI-driven analysis of earnings transcripts suggests corporate sentiment cooled from the second quarter’s record high but remains elevated, with mentions of “weak demand” still well below average.
References to “inflation” and “cost pressures” rose 40% year-on-year, but overall guidance has remained positive.
Companies are on standby for another US interest rate hike, although the chances of one at the conclusion of today’s Federal Reserve meeting appear slim.
Instead, the focus will be on chair Kevin Warsh’s press conference and how the Fed balances still-elevated inflation and solid growth against the recent tightening in financial conditions caused by rising Treasury yields.
Deutsche Bank thinks the broader message is likely to be hawkish as recent inflation data supports the case for further tightening, potentially through hikes in December and March.
The bank adds that Warsh is likely to make clear today that tighter financial conditions are not a substitute for rate hikes.
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