Market Outlook: Big Tech earnings could spark a sharp pullback

North American stocks are hovering near record highs as investors balance strong momentum in artificial intelligence against rising geopolitical and cost pressures. With several major technology firms set to report, markets face a critical test in the days ahead.

BNN Bloomberg spoke with Michelle Connell, president and owner of Portia Capital Management, about how concentrated tech leadership, AI spending trends and rising consumer costs could influence the next move for equities.

Key Takeaways

• Five major tech companies represent roughly 25 per cent of the S&P 500, making their earnings pivotal for overall market direction.
• Elevated AI infrastructure spending could renew investor concerns if it continues to outpace revenue and cash flow growth.
• Semiconductor stocks have surged sharply, highlighting strong demand but increasing the likelihood of near-term consolidation.
• Rising energy and food costs are putting pressure on consumers, which could weigh on spending and corporate earnings.
• Banks and infrastructure players adopting AI are seen as secondary beneficiaries alongside dominant chipmakers.

Read the full transcript below:

ANDREW: U.S. stocks hit record highs last week despite the Strait of Hormuz remaining largely closed. Five Magnificent Seven tech giants report this week, so there will be plenty of news. Our guest says if those earnings disappoint, markets could pull back sharply. Let’s get more from Michelle Connell, president and owner of Portia Capital Management. Michelle, great to see you. Thank you very much for joining us.

MICHELLE: Thanks for having me, Andrew.

ANDREW: It does look like there could be potholes this week if there are major disappointments from any of these Magnificent Seven companies.

MICHELLE: Exactly. Everybody needs to keep in mind that these five companies represent 25 per cent of the S&P, or US$18 trillion. That’s a lot of leverage.

ANDREW: It seems as though the buildout is continuing — the AI data centre buildout. We haven’t really seen a sign of a slowdown in that yet.

MICHELLE: No, we have not. You’ve had chip stocks that have been on a tear because of that. In the last month, the SOX is up 40 per cent. At the same time, Nasdaq stocks outside the semiconductor range are up anywhere between 20 and 25 per cent. We need to remember that last quarter, when we saw a lot of the buildout for companies like Microsoft, Google and Amazon, they were continuing to increase their expenditure budgets. But it looked like those were getting way ahead of their revenues. We had a pullback the last time those companies reported, and that’s what I’m focusing on, Andrew.

ANDREW: Sorry — just remind us, Michelle, what happened last time? What are you focused on?

MICHELLE: Last time we had earnings reports for the fourth quarter, when Amazon, Alphabet and Microsoft reported, we had a pullback in the Nasdaq — specifically those names — because they increased their AI infrastructure buildout, and investors were concerned that was going to get ahead of their revenues and their cash flow.

ANDREW: And have those concerns eased, do you think? Are people less worried now about these companies overextending themselves?

MICHELLE: When you’ve had this type of run-up in a month — when semiconductor stocks have gone up basically every single day during April — you need some sort of breather. Markets use things like rising expenditures for AI infrastructure as a focal point. If it looks like it’s going to take a lot more money to get these five companies in position to take advantage of AI technology, and they don’t yet have the cash, shareholders will use that as an excuse to take some money off the table.

ANDREW: We’ve also got layoffs at companies such as Meta and Microsoft. Is that factoring into investors’ minds?

MICHELLE: It’s been a bit of a mixed bag. Companies have reported layoffs. Sometimes that’s been negative for a technology stock, sometimes it’s seen as a reduction in expenditures and the stocks go up. I think investors and markets are understanding that’s part of AI implementation — that people are going to lose their jobs, unfortunately.

ANDREW: Right. And of course, we’ve got these complex interlocking relationships between companies — OpenAI and Microsoft, for example — but there are signs of dissonance in that relationship.

MICHELLE: This morning, for example, you’re looking at Qualcomm announcing a relationship with Microsoft to potentially develop an OpenAI semiconductor. Nobody really wants to be dependent on one behemoth — for instance, Nvidia. Companies are trying to find ways not to be beholden to a single provider, while also building out their own semiconductor supply and infrastructure.

ANDREW: You still hold some of these chip giants — Broadcom, Nvidia, Taiwan Semiconductor. At this stage, are they almost must-owns because they’re growing so fast?

MICHELLE: Full disclosure, in a prior life I was a semiconductor analyst, and that has served me well. I do own these stocks. I think they are must-owns. They will probably pull back in the near term, but over the long term, I think they still have upside in the next 12 to 18 months of about 20 per cent. Companies will still need to rely on one-stop shops before they can fully build out their own chips. So names like Nvidia, Broadcom, which does customization, and Taiwan Semiconductor — the largest fabrication facility in the world — remain critical to AI development.

ANDREW: What about the big banks, Michelle? Before we let you go, are names like JPMorgan and Bank of America must-owns for a diversified portfolio?

MICHELLE: In terms of profitability, they’re second after technology. I think they are important. JPMorgan, for instance, has invested heavily in AI and will benefit from that implementation. Looking at banks that are using AI to increase profitability — yes, I think owning those is important. Recently, I also picked up Nasdaq because it’s implementing a lot of AI into its infrastructure.

ANDREW: And just finally, today’s news — President Donald Trump says he’s not sending envoys to Pakistan for more talks at this stage. That’s helping to push oil higher. What’s your view? Are you changing your portfolio based on developments in the Persian Gulf?

MICHELLE: I’m not changing it today or this week, but like many portfolio managers, I’m closely watching what’s happening in the Middle East because it affects the everyday consumer. In the United States, it’s been estimated that the average family is spending an additional $400 a month because of higher gasoline and food prices. That will trickle down to companies and consumer spending. With Amazon reporting, for example, it will be interesting to see how its e-commerce business is holding up as consumers face higher expenses.

ANDREW: Michelle, we’ll leave it there. Thank you very much for kicking off the week for us. Michelle Connell, president and owner of Portia Capital Management.

—

This BNN Bloomberg summary and transcript of the April 27, 2026 interview with Michelle Connell are published with the assistance of AI. Original research, interview questions and added context was created by BNN Bloomberg journalists. An editor also reviewed this material before it was published to ensure its accuracy and adherence with BNN Bloomberg editorial policies and standards.