Tech sector's resilience amidst turmoil: Fund managers remain optimistic about AI growth opportunities.

Despite a turbulent start to the year, tech sector investors remain optimistic due to continued growth and opportunities. President Trump's AI initiatives signify sustained growth, and the data centre infrastructure buildout is seen as a structural shift. Strong Q1 earnings from tech companies, particularly Microsoft, have reinforced enthusiasm for AI. Investors see an opportunity in the tech sector, with many stocks trading at a discount to recent history.

Despite a turbulent start to the year, tech sector investors remain optimistic due to continued growth and opportunities. The sector has shown resilience, with strong Q1 earnings from major companies reinforcing enthusiasm for AI initiatives. President Trump's AI initiatives and the data center infrastructure buildout are seen as significant drivers of sustained growth.

Taiwan Semiconductor Manufacturing Company (TSMC), the world’s largest contract chipmaker, reported record quarterly earnings, driven by unprecedented demand for AI chips and a surge in iPhone chip orders [1]. The company's share price is expected to surge, potentially reaching all-time highs. TSMC's net profit rose by 61 percent year-on-year, reaching NT$398.27 billion (£9.7bn; $12.8bn), while revenue grew by 44 percent to $30.07 billion (£23.0bn) [1]. The primary driver of growth has been the robust demand for AI-related chips, particularly for the leading-edge nodes below 7nm [1]. Advanced chips manufactured on 3nm, 5nm, and 7nm process nodes made up 74 percent of the company's revenue [1].

Alphabet Inc (GOOGL), the parent company of Google, also reported strong Q2 revenue expectations. Keybanc Capital Markets analyst Justin Patterson maintained an Overweight rating and raised the price forecast from $195 to $215, citing stable macro conditions and positive product cycles, including AI initiatives [2]. The company is expected to report a solid second quarter with $94.6 billion in revenue, surpassing consensus, with growth fueled by Search, YouTube, and Cloud [2]. Patterson noted that stocks, including Alphabet, are starting to price in potential upside, with a focus on AI initiatives, advertiser momentum, and expense efficiencies [2].

Analysts from Wedbush are expecting a strong second quarter earnings season for the tech sector, with cloud and AI spending as key drivers. The top five tech picks for the second half of the year include Nvidia (NASDAQ:NVDA), Meta Platforms (NASDAQ:META), Microsoft (NASDAQ:MSFT), Palantir Technologies (NASDAQ:PLTR), and Tesla (NASDAQ:TSLA) [3]. The analysts believe that investors are underestimating the underlying AI-driven growth ahead and expect a very strong 2Q tech earnings season [3].

Despite geopolitical tensions and trade policy uncertainties, the tech sector appears well-positioned for continued growth. The Trump Administration's softening stance on tariffs and potential trade deals with China, Japan, and India could further boost investor confidence [3]. Additionally, the resumption of Nvidia's shipments of its H20 chips to China indicates a strategic positive for the tech space [3].

Investors see an opportunity in the tech sector, with many stocks trading at a discount to recent history. The sector's resilience and the potential for AI-driven growth make it an attractive investment option for financial professionals.

References:
[1] https://m.economictimes.com/news/international/us/tsmc-reports-record-profits-as-ai-boom-fuels-chip-demand-stock-expected-to-open-at-all-time-high/articleshow/122627526.cms
[2] https://www.benzinga.com/analyst-stock-ratings/reiteration/25/07/46475467/alphabets-ai-initiatives-strong-ad-performance-fuel-optimism-analyst
[3] https://seekingalpha.com/news/4467808-tech-sector-likely-to-see-strong-q2-earnings-season-ai-and-cloud-spending-key-drivers-wedbush