Earnings are coming through thick and fast in the US. This means that companies with market capitalisations bigger than many entire global stock exchanges are being thrown around like rag dolls.
At the time of writing, Meta has dropped by about 10% in response to earnings, while Microsoft is up 15%!
Keep in mind that these are the most closely followed stocks in the world, backed up by reams of institutional analysis. Such violent movements tell us that the market has little idea how to handle the AI risk/reward trade-offs, turning the tech giants into a glorified casino.
For more evidence of this phenomenon, look no further than the Korea Composite Stock Price index, or Kospi.
Until this year, the only thing South Africans knew about Korea is that it makes solid, affordable cars. But in 2026, Korea dominated global headlines for a different reason: memory stocks. Ironically, those punting this sector appeared to be struggling from memory loss.
Instead of recognising this as the cyclical industry that it has always been, bulls argued that we’ve moved from a cyclical to secular story. Blind to the risk of competition and supply coming on board to meet demand, they predicted that the demand shortfalls would last for years.
This took us to the most dangerous argument of them all in the markets: “This time, it’s different”. But it wasn’t different. South Korea’s Kospi was 40% off its 52-week high at the time of writing. I will remind you that this is a market index, not just one stock.
This brings us to a worthwhile point to remember: when you are looking at a cyclical industry, the most dangerous time to buy is when the earnings multiples are low. They look “cheap” because the market has recognised that the trailing earnings aren’t sustainable, which means the valuation is just a guessing game about the potential fall in the following year’s earnings.
Ironically, cyclical stocks are at their most appealing when the trailing earnings multiple is relatively high despite the share price doing badly. In such a scenario, the market is starting to focus more on the forward earnings than the trailing earnings. That’s when cyclicals are ready to make the real money for investors — whether we are looking at mining or memory stocks.
Moving on from memory and back to the hyperscalers, the name that hasn’t taken much of a beating yet is Alphabet. It’s only 18% off the 52-week high — barely a blemish compared to the bloodbath we’ve seen elsewhere. This is despite the historically significant set of numbers that were just released, with Alphabet reporting its first-ever quarter of negative free cash flow.
Notably, this came hot on the heels of another milestone: the largest equity capital markets raise in history. Alphabet raised $84.75bn in June in a raise that was even supported by Berkshire Hathaway.
Alphabet burnt less than $6bn in the latest quarter, so that raise will get them through a lot of capex. If anything, the sheer size of that raise now looks even more terrifying, as one wonders just how bad the negative free cash flow could get. Alphabet casually upgraded its capex guidance by a further $15bn, with the expectation now being for FY26 capex of between $195bn and $205bn. In FY25, they spent less than half that ($91bn)!
Throughout this market noise, I’ve tried to stick to my knitting. This has included hanging on for dear life in Microsoft, with a wild peak-to-trough of -37% over the past 12 months. The rally in response to the latest earnings is most welcome, with highlights such as Azure growing revenue by 43%. I have many doubts about Open AI, but I have zero doubt about Microsoft’s entrenched market position in global enterprise software and cloud infrastructure.
But the star of the show in my portfolio has been Apple, the stock that I’ve paid the least attention to (go figure). With a rally of 59% in the past year, it’s become my biggest position. While the hyperscalers fight it out for supremacy in a market that the Chinese will probably disrupt one day anyway, Apple has sat back and focused on doing what it does best: selling hardware and generating services revenue from the world’s most lucrative walled garden.
As I write this, headlines are flashing about buyers climbing back into memory stocks such as SanDisk. Perhaps this time, it’s different — but it probably won’t be. These stocks remind me of the volatility in crypto. I’ve actively avoided crypto and I’m not about to change that approach.