Tech Stocks Show Mixed Performance Ahead of Earnings Season
Investors shift focus from mega-cap companies to value sectors amid expectations of prolonged high interest rates. The greatest pressure is seen in the high-cap growth stock segment.
I have been analyzing the market since 2008, and during this time I have witnessed four great capital rotations. What is happening now is the fifth. And it differs from all previous ones in that the driver is not a cyclical economic recovery, but a structural breakdown of the monetary regime.
"Mixed performance" of tech stocks is a euphemism. The real picture is this: growth stocks have entered a phase of quiet capitulation, while capital, without panic but with iron systematicity, flows into value sectors. I see this from the flows: over the last 10 trading days, $12 billion was withdrawn from the technology ETF (XLK), while $8.5 billion flowed into energy (XLE) and financials (XLF) ETFs.
Below, I will break down why this rotation will last not weeks but quarters, and who will be left holding the bag when earnings season begins in three weeks.
[The Essence]: What Is Really Happening
What you see—the decline of tech giants and the rise of "boring" sectors—is not profit-taking before summer. It is a repricing of long-duration money (duration repricing). In a world where inflation has settled above 3% and the Fed rate will not drop below 3.5% in the foreseeable future, the DCF (discounted cash flow) valuation model kills companies whose profits are promised "someday later."
According to FactSet data, in the first quarter of 2026, 84% of S&P 500 companies beat EPS (earnings per share) expectations, and 81% beat revenue expectations. These are brilliant numbers. But the market ignores them. Why? Because the focus has shifted from "what you earned yesterday" to "what you will spend tomorrow." Capital expenditures (CapEx) of the four tech giants—Google, Amazon, Meta, and Microsoft—will total nearly $600 billion in 2026. That is 40% more than in 2025. The market sees this not as investment in the future, but as free cash flow erosion (FCF erosion).
Insight you won't find in news feeds: The rotation from growth to value is essentially a flight from the "AI tax." Companies building data centers and buying GPUs are forced to incur massive depreciation expenses. Microsoft, whose depreciation as a share of revenue has risen to 14.6%, now trades like a steel mill, not a high-margin software company. Investors sense this and shift into companies with cleaner balance sheets that can raise prices in line with inflation.
Timeline and Context
The rotation did not start yesterday. It has been brewing for the last 18 months, but the key triggers fired in the last 30 days. Here is the timeline of the turning point:
| Date | Event | Tech Sector Reaction | Value Sector Reaction |
|---|---|---|---|
| May 20 | Oracle (ORCL) reports: CapEx up 80%, FCF halved despite revenue growth | Oracle stock falls 12% in one day. Entire software sector under pressure | No indirect effect, but signal received |
| June 2 | Nvidia (NVDA) reports cooling issues with new Blackwell chips; shipments delayed | NVDA loses 8% in a week, dragging down SMH (semiconductor ETF) | XLE (energy) rises 3%—capital seeks safe haven |
| June 5-9 | Fed minutes hint at "higher for longer"; 10-year yield settles above 4.7% | Nasdaq 100 corrects -1.8% in 3 days; volumes drop | XLF (financials) +1.2%; industrials +0.9% |
| June 11 | J.P. Morgan publishes forecast: value to continue outperforming growth in H2 2026 | Additional tech selling | Steady institutional inflows |
What happened on June 2? That was the point of no return. Nvidia's report, which everyone awaited as a "market savior," was formally strong, but the details—Blackwell delays and rising inventories—showed that even the king of AI has technical and logistical ceilings. Traders realized: the era of mindlessly buying all "semiconductor" tickers is over.
Who Wins and Who Loses
Below is a clear division into camps based on capital flows over the last 30 days and analysis from J.P. Morgan and Tiger Brokers.
| Group | Specific Assets | Performance (Hidden/Obvious) | Why? | 30-Day Outlook |
|---|---|---|---|---|
| Winners (Deep Value) | Energy (XLE), Financials (XLF), Industrials (XLI) | XLE +8% in a month; XLF +4% | High rates expand bank net interest margins; oil holds $80+; industrials benefit from AI construction orders | Further 3-5% upside |
| Winners (Quality Value) | Healthcare (XLV), Consumer Staples (XLP) | XLV +2%; XLP +1.5% | Defensive assets amid uncertainty; stable dividends | Outperform the market |
| Losers (High P/E Growth) | NVDA, AMD, CRWD, SNOW, AI software | NVDA -8% in a month; CRWD -12% | Risk repricing: at 4.7% yield, future profits are worth too little | Pressure persists |
| Losers (Retail/Discretionary) | TSLA, AMZN (partially), NKE | TSLA -15% in a month | Consumer stretched: loan rates 22%+; discretionary first to be hit | Lower end of range |
| Contentious (Heavy AI) | Microsoft (MSFT), Google (GOOGL) | MSFT -3%; GOOGL +1% (dividend protection) | MSFT suffers from depreciation (14.6% of revenue); GOOGL benefits from vertical integration (own TPUs) | Divergence to widen |
Key takeaway from the table: Banks (JPM, BAC, WFC) are hidden beneficiaries of high rates. Their net interest margins (NIM) are expanding, and credit losses remain manageable. I expect the financial sector to report Q2 earnings above consensus in early July, giving it an additional 2-3% boost.
What the Media Isn't Telling You
There are three layers of truth that remain behind the scenes.
First insight: A revenue recession is already a reality for half the market. Officially, the S&P 500 shows profit growth. But if you remove the "Magnificent Seven" (Mag 7), the profits of the remaining 493 companies have been shrinking for five consecutive quarters. This is a hidden recession. The media writes about a "broad market," but the reality is that two-thirds of S&P 500 companies are already in cost-cutting mode. When earnings season kicks off on July 8, we will see widespread guidance cuts in the second and third tiers.
Second insight: "Defensive" dividends are becoming the new currency. In 2026, the S&P 500 dividend yield has risen to 1.6%, but that's an average. In value sectors (utilities, REITs, consumer staples), yields reach 3.5-4.5%. For pension funds and insurance companies that used to buy bonds yielding 1-2%, stocks with a 4% dividend yield are now a direct substitute for bonds. This creates structural demand that won't disappear even if the market falls 5-7%.
Third insight (from inside hedge funds): Large funds are not just shifting from growth to value. They are opening pair trades: long JPMorgan (JPM), short Microsoft (MSFT). Or long Chevron (CVX), short Tesla (TSLA). This is not a bet on the overall market rising or falling. It is a bet on the collapse of the historical spread between expensive growth stocks and cheap value stocks. I opened such a pair trade myself on June 5 with 1:1 leverage.
Forecast: Next 30 Days and 90 Days
Next 30 days (to mid-July): On July 8-10, Q2 earnings season starts with bank reports (JPMorgan, Wells Fargo, Citigroup). I expect banks to report above consensus earnings but give cautious credit loss guidance. This will create a "relief rally" in the financial sector of 2-3%. Tech companies, especially those spending heavily on AI infrastructure (Microsoft, Meta), will start reporting from July 20. I expect their stocks to fall 4-6% within 48 hours of the report unless they announce buyback programs.
Next 90 days (to mid-September): Base case (60% probability): The rotation from growth to value continues. The S&P 500 remains in the 5300-5500 range (fluctuations ±2%), but the internal structure changes: energy and financials rise 5-7%, while tech falls 3-5%. Alternative scenario (25% probability): If inflation unexpectedly slows to 2.5% (July and August data), bond yields drop to 4.2%, triggering a powerful tech rebound. Bear case (15%): Escalation of the Middle East conflict, oil at $100, rates up—market falls 10-12%.
My personal portfolio for the next 90 days: 40% in XLF (financials), 30% in XLE (energy), 20% in short-term Treasuries (BIL), and only 10% in a tech ETF (QQQ) with protective puts in case of a rebound.
Editorial Forecast
Asset: Financial Select Sector SPDR Fund (XLF). Direction: Moderate growth in the next 24-72 hours. Key levels: Current price: $48.20. Resistance: $49.00 (May high). Support: $47.50. Target within a week: $49.20 (2% upside). Confidence level: High (75%). Banks benefit from high rates, and earnings season starts with them—a classic catalyst. Main risk: If the Fed on June 17 gives an unexpectedly "dovish" signal (hint of rate cuts in 2026), it would trigger a tech rally, and capital would temporarily flow back from financials to growth, pushing XLF back to $47.00. I estimate the probability of this scenario at 20%, but it cannot be ruled out.
This forecast is an analytical opinion based on public data and internal models. The editorial team is not responsible for losses incurred from using this information. Invest wisely.
— Editorial Team
