May 6, 2026

Stocks started the week on a defensive note after the U.S. and Iran exchanged fire as American ships assisted vessels traversing the Strait of Hormuz — sending crude prices higher and rekindling concerns around potential economic impacts of extended hostilities. Nonetheless, losses were relatively measured amid market chatter surrounding the stronger-than-average earnings season. 

Topics of the week: 

  • AI Demand is Accelerating Revenue: Hyperscalers (Amazon, Microsoft, Alphabet, etc.) are seeing strong demand for AI and cloud services, supporting continued revenue expansion.
  • Margin Expansion Likely to Continue: AI-driven productivity gains are expected to push already-record S&P 500 margins even higher, especially in technology. 

What we are watching:

  • High Capital Spending Risk: Massive AI investment (up to ~$725B) requires significant funding, including debt, which could pressure balance sheets if returns fall short.
  • Potential Demand Slowdown: If AI adoption or value creation disappoints, demand for computing capacity and infrastructure could weaken. 

 

Index Data & Market Performance 

 

Data as of Market Close 4.27.26 

source: gemini.google.com*

In Focus

This week is dominated by labor market data and critical tech earnings. The highlights include the April Jobs Report on Friday and earnings from AI-centric companies like AMD and Palantir.

Tuesday - JOLTS Job Openings, New Home Sales 

Wednesday – EIA Petroleum Status 

Thursday – Jobless Claims

Friday – April Jobs Report, Consumer Sentiment

 

What's Trending: AI Wave Continues

As investment in AI ramps up and the market’s confidence in technology’s value increases, as we believe it did last week, the outlook for the technology sector improves. The debate about whether AI will fulfill its promise as a productivity enhancer won’t be settled for quite some time. But what we do know is that massive spending is going to continue. The top five hyperscalers building out AI data centers and unleashing unprecedented computing power, namely Alphabet, Amazon, Meta, Microsoft, and Oracle (ORCL), have told us spending could reach up to $725 billion, with Wall Street’s median forecasts calling for just over $670 billion (for comparison, that number was roughly $520 billion at the end of 2025). 

 

With the S&P 500 at record highs and technology having outperformed the broader market in 2023, 2024, 2025, and year to date, suggesting the sector is reasonably valued may be hard to believe. The sector has nearly tripled in price since the start of 2023. However, at a forward price-to-earnings ratio (P/E) of 24, just 14% above the S&P 500, with compelling margins and earnings growth to the broad market, we believe the sector is undervalued. A few more years of massive AI infrastructure spending and potential margin expansion as AI adoption ramps could drive technology sector valuations much higher, in our view. If any sector can generate productivity gains from AI, it’s probably technology.

 

 

 

 

 

Disclosures

*The data for the total returns of the S&P 500, Dow Jones 30, and NASDAQ Composite are compiled and published by several financial news outlets, index providers, and government/academic sources.

Based on typical financial data providers and the search results, here are the likely sources for this data:

  • S&P Dow Jones Indices (S&P Global): This is the official index calculator for the S&P 500 and the Dow Jones Industrial Average (DJIA). They publish index data, including total returns, in daily, weekly, and monthly reports/commentary.
  • Nasdaq Global Indexes: They are the official index calculator for the NASDAQ Composite. They also publish fact sheets and performance reports with total return data.
  • Financial News Agencies and Publications: News outlets like The Associated Press (AP) and financial publications like Investopedia regularly report on the daily, weekly, and year-to-date (YTD) returns of these major U.S. indexes.
  • Federal Reserve Economic Data (FRED) / St. Louis Fed: FRED, maintained by the Federal Reserve Bank of St. Louis, is a public resource that often includes daily closing levels for indices like the S&P 500, which can be used to calculate returns.
  • Financial Data Platforms (e.g., Bloomberg, YCharts, MSCI): Professional and commercial financial data providers often republish or calculate returns based on the official index data for their clients.