Episode summary
Can the Tech Surge Continue?
The Markets
· · Hosts: Chris Hussey · Guests: Peter Callahan
Summary
Tech’s recent surge is being driven by narrow leadership, fast momentum, and improving earnings rather than a broad-based rally. Peter Callahan said the Nasdaq is up 20% in three months, but only about half its stocks are higher, while semiconductors are up nearly 80% this year and AI-linked stocks have matched that price move with roughly 30% earnings growth.
He argued that first-quarter tech results reinforced the bull case because capex revisions kept rising, with calendar 2027 capex estimates moving to about 20% growth and more than $900 billion in spending. He also said compute and AI supply chains remain tight, with visibility now extending into calendar 2027 as shortages push orders out.
Software was a more mixed story, but Callahan said investors are finally seeing dispersion between winners and losers rather than uniform pressure across the group. He thinks the key question is whether companies can show AI is helping revenue growth, while US internet looks more interesting again because consumer pressure is easing and product innovation tied to AI is improving. He said rates matter less than before, though they remain a factor to watch.
Key takeaways
- Callahan said the tech rally is narrow, with the Nasdaq up 20% in three months but only about half its stocks higher.
- He said semiconductors are up nearly 80% this year, but earnings revisions are the main reason he still expects investors to buy dips.
- He said calendar 2027 capex estimates have risen to about 20%, implying more than $900 billion of spending next year.
- Callahan said software is becoming a stock-pickers' market, with AI adoption and revenue acceleration separating winners from laggards.
- He said US internet is improving as consumer temperature cools and AI-related product innovation picks up.
Notable quotes
“One, narrow breadth. Two, high velocity. And three, anchored by earnings growth and earnings revisions”
“I think CapEx estimates for calendar '27 went up to twenty percent, so you're now looking at something like north of nine hundred billion dollars of CapEx in 2027”
“At the moment, it's whether you are able to indicate that AI is helping your business and driving faster revenue growth, and if it is, the market is very happy to re-rate shares”
How the episode opens
This is The Markets. I'm Chris Hussey, and today is Thursday May 28th, and I'm here on the Goldman Sachs trading floor with Pete Callahan, who is the US tech, media, and telecom sector specialist within global banking and markets. Pete, thanks again for taking the time.
Thanks for having me, Chris. Okay, let's start with the markets, Pete, because we've had a almost historic run in tech off the March 30th lows. Hasn't been as Mag 7-y as we've seen in the past.
What do you make of the rally? Yeah, I'd say three things stand out to me. One, narrow breadth.
Two, high velocity. And three, anchored by earnings growth and earnings revisions. So what do I mean by that?
If I look back over the last three months, the Nasdaq is up twenty percent, but when you look under the hood, only about half of the stocks in the Nasdaq are even up at all over that stretch. So you have narrow breadth, again led by semiconductors, which are up nearly eighty percent this year. Best year since 1990.
Ooh. Second, high velocity. The Nasdaq is off to its second-best start to a year in over twenty-five years, and so we've really had a really rapid rise this year in tech stock prices.
And finally, in terms of earnings growth, if you looked at sort of AI stocks within the S&P five hundred, that group was about thirty-- up about thirty percent this year. Incidentally, their earnings have also risen about thirty percent this year. So you are seeing multiples kept in check, driven by strong earnings revisions in tech this year.
All right. So, you know, you pointed to those earnings. Let's talk about them a little bit here.
First quarter results, what'd you make of it?
From the episode’s captions: roughly the first two minutes, lightly cleaned. Keep watching on YouTube →
Topics
- tech stock surge
- sector opportunities
- us technology media telecom
- market rally drivers
Companies and tickers mentioned
- GS
- Goldman Sachs
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Summary, takeaways and quote selection by Octagon. Quotes are short excerpts; the full conversation is in the episode.
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