The Tech Earnings Showdown: Why HSBC Bets on Hyperscalers Over Chips

As we navigate the choppy waters of the Q2 2026 earnings season, a fascinating debate is unfolding in the tech world. Max Kettner, the astute Chief Multi-Asset Strategist over at HSBC, has thrown down a rather bold gauntlet: he believes that hyperscalers, those behemoths of cloud computing, are actually far better positioned for a positive surprise than their semiconductor counterparts.

It’s quite a call, and frankly, Kettner sees a "melt-up" moment potentially brewing for these tech titans. Think of the likes of Alphabet, Microsoft, Amazon, and Meta – the core of what many still affectionately call the 'Magnificent 7.' There's a growing sense, he suggests, that investors are regaining confidence in these companies, recognizing their remarkable ability to generate significant profits even while pouring massive investments into AI infrastructure. What's more, Wall Street's expectations for Q2 earnings, particularly concerning capital expenditure, appear remarkably subdued. This, Kettner argues, sets the stage for a delightful upside surprise for these hyperscalers.

And here's a crucial point he emphasizes: the market, it seems, might be significantly underestimating just how quickly these cloud giants can turn their substantial AI investments into tangible, monetizeable revenue. We're talking about real money, real services, and real growth that perhaps the consensus view hasn't fully factored in yet. These companies aren't just spending on AI; they're building the future, and that future looks increasingly profitable.

Meanwhile, the picture for semiconductor stocks, while undeniably bright in the long run, presents a more immediate challenge, at least according to Kettner. He warns that the recent "bruising unwind" in momentum trades for chipmakers, like NVIDIA, could very well continue. Why? Because the earnings growth expectations for these companies are, frankly, still incredibly lofty. If they fail to meet those sky-high projections, even by a little, we could see further downward pressure.

He even points to a popular hedge fund strategy – going long on semiconductors while shorting hyperscalers – as what he now considers a "pain trade." It’s a position that's likely causing some serious discomfort right about now. Adding to the unease for chip stocks are broader market factors: stretched sentiment, a noticeable fading of fiscal impulse, and the ever-present uncertainty stemming from the US midterm elections. All these elements combined could, unfortunately, trigger a wider market pullback that impacts chipmakers disproportionately.

Of course, it's never a one-sided story. Mike O'Rourke, Chief Strategist at JonesTrading, offers a slightly different angle, noting that the sheer scale of AI capital expenditure "has stretched hyperscalers to the edge of acceptable investor limits." It's a fair point; these companies are spending huge sums. Yet, Alexandre Drabowicz, Chief Investment Officer at Indosuez Wealth Management in Paris, echoes Kettner's core sentiment, advising investment in both hyperscalers and semiconductors, primarily because he, too, believes the market truly underestimates the monetization potential of AI by those big cloud providers.

So, as Q2 earnings reports roll in, particularly with Microsoft reporting on July 29, 2026, and Alphabet's figures acting as a bellwether the week prior, all eyes will be on how these tech titans perform. Will Kettner's prediction of hyperscalers outshining chipmakers come to pass? Only time, and the balance sheets, will tell.