US markets took a well-earned breather this week after President Trump announced an indefinite ceasefire to hostilities in the Middle East.
It is likely to be the quiet before the storm ahead of a next week’s deluge of data including a interest rate decision from the Federal Reserve and earnings from the mega-cap technology firms, including Apple, Alphabet and Microsoft.
The economy continues to show resilience with March retail sales showing a 1.7% month-on-month rise, comfortably ahead of the 1.4% forecast by economists.
The strong report sent bond yields higher with the 10-year treasury yield touching 5.25%.
AI-related stocks and chipmakers continued their ascent on data centre demand and strong results from Texas Instruments.
One of the biggest losers this week was Athleisure company Lululemon which sank 15% after appointing ex-Nike executive Heidi O'Neill as CEO, defying a push by activist investor Elliot Investment Management to appoint industry veteran Jane Nielsen.
Investors take fright at Tesla’s big spending plans
A first quarter earnings beat for electric vehicle maker Tesla was not enough to jump start the shares which fell on 23 April, extending their underperformance versus technology peers and the Nasdaq Composite index.
Investors took fright at Telsa’s plans to ramp up capital expenditures for 2026 to $25 billion from the $20 billion indicated in January. For context, the EV maker spent just $8.5 billion in 2025.
Elon Musk said: “You should expect to see a very significant increase in capital expenditures that are I think are well justified for a substantially increased future revenue stream.”
The spending reflects the EV maker’s pivot towards artificial intelligence, robotics and computer chipmaking. Musk told analysts that production of its Optimus robot would probably be in production by the summer.
This means that despite posting a positive free cash flow of $1.4 billion in the quarter Tesla is expected to have negative free cash flow for the whole of 2026.
A worry for investors is that unlike other big technology companies spending heavily on AI, Tesla does not have a cash generative high margin business to support such investments.
Texas Instruments sees continued recovery
Shares in chipmaker Texas Instruments gained as much as 16% after delivering a knock-out quarter and projecting second quarter results above consensus analysts’ forecasts on strong data centre demand for its chips.
As one of the first chipmakers to report earnings it is closely watched as its kit is used across a wide spread of industries. The data centres division grew 90% year-on-year while demand in industrial and autos end markets saw a recovery as excess inventory was cleared.
Stifel analyst Tore Svanberg said: “We believe industrial is particularly strong with lean inventories and improving sell-through. Automotive is also likely starting a new up-cycle.”
The company expects second quarter revenues in the range of $5 billion to $5.4 billion and earnings per share between $1.77 and $2.05, way above analysts’ estimates of $1.57.
The shares continued their strong ascent to make a record high after gaining of 81% over the last year.
IBM caught up in software sell off
Despite delivering quarterly revenues and earnings above consensus analyst estimates, IBM shares fell as much as 10% on continuing fears over AI disruption which has plagued software companies in recent weeks.
The shares have fallen by around a quarter since February when AI company Anthropic released a tool which has been optimised for modernising legacy codes used by companies like IBM.
Revenue grew 9% year-on-year to $15.92 billion and adjusted earnings per share came in at $1.91 compared with estimates of $1.81. That was not enough according to BMO analyst Keith Bachman who believes IBM’s software growth was ‘light’.
“We continue to struggle to justify a premium software multiple at the organic growth profile to get more constructive on IBM,” added Bachman.
CEO Arvind Krishna insisted that AI continues to be a tailwind for its global business.
IBM maintained its full year outlook which calls for more than 5% constant currency revenue growth and an increase in free cash flow of around $1 billion.
Martin Gamble: Shares and Markets Writer
Martin Gamble is Shares and Markets writer at AJ Bell. He was previously the Education Editor of Shares Magazine. He has been with the business since 2019.
Martin graduated from the University of Kent in...
