Markets Shrug Off Geopolitical Risk
Equity markets are currently demonstrating a remarkable capacity to discount geopolitical risk in favor of fundamental earnings strength. Despite an escalating drumbeat around potential US action against Iran, with chatter about limited strikes intended to force Tehran back to the negotiating table, investors have largely set aside these concerns. Reports from Iran of missile explosions and what appears to be testing of air defense systems are not reassuring signals, yet the market is choosing to focus on corporate results.
A particularly important deadline that has received little public attention falls on Friday, when Congress technically must act to approve or extend the current conflict authorization under the War Powers Resolution. While both Democratic and Republican administrations have historically ignored such requirements, this expiration date could spark controversy. For now, however, the market continues to look through the noise.
A new and notable correlation has emerged in the price action: oil prices, energy stocks, and the broader equity market are moving higher together. This is a relationship that did not exist roughly a month ago, when these moved more independently. Whether this represents a peak or a continuation of the trend remains an open question, but it is difficult to fade a market in which semiconductors are performing this strongly. The next critical signal will be financials. If they continue to bid higher, that will reinforce the conclusion that the market is willing to sustain current valuations even in the face of potentially weak economic data over the coming months.
Alphabet: Fundamentals Confirming the Bullish Trend
Alphabet has emerged as the clear standout among the Mag 7 names, and the fundamentals are confirming the chart action. Revenue came in at $109.9 billion against expectations of $107.2 billion, representing a 22% year-over-year increase. Reported earnings per share of $5.11 against a $2.64 estimate are not directly comparable due to one-off items, but the underlying story is robust. The company also raised its quarterly dividend by 5%, bringing it to 22 cents per share.
The segment-level breakdown is particularly striking. Google Cloud revenue grew 63% year-over-year, beating estimates by approximately $2 billion. The enterprise AI solutions group posted an 800% increase in Q1 alone and has now become the primary cloud growth driver. Sundar Pichai addressed the persistent constraints on available compute, and the company raised its capex guide by roughly $5 billion. Crucially, even as capex rises, Alphabet is taking market share and monetizing its AI investments — a sharp contrast to other names in the space.
A notable development is Alphabet's deal with Oklahoma Gas and Electric Company (OGE) to fund and power three data centers in Oklahoma. The company will pay for the full power requirements and has structured a tariff arrangement designed to ensure that existing OGE customers are not financially impacted by the buildout. This is a meaningful signal: it is one of the first explicit deals that addresses the public concern around hyperscalers shifting infrastructure costs onto residential ratepayers, and it represents good news for both Alphabet and OGE.
Meta: Punished for Vague Capex Guidance
Meta tells the opposite story. Shares are down approximately 9.2% on results that, taken at face value, were not bad. Revenue of $56.31 billion exceeded estimates of $55.5 billion, marking a 33% year-over-year increase. Earnings per share of $7.31 beat the $6.79 estimate, although a one-time tax benefit of around $8 billion distorted the figure.
The problem is twofold. First, daily active people came in at 3.56 billion — up 4% year-over-year but down 5% quarter-over-quarter, and below street expectations. Management blamed the decline on internet disruptions in Iran and WhatsApp restrictions in Russia. Second, and more damaging, Mark Zuckerberg appears unwilling to explain to the street precisely where the capex spend is going and how quickly it will translate into monetized business. Where Sundar Pichai and others are providing detailed roadmaps, Meta is offering vague guidance with no clear timeline for return on investment. The market is not granting them the benefit of the doubt.
Amazon: Clear Vision, Decent Margins
After some choppiness in the immediate aftermath of its release, Amazon is now being rewarded. Revenue came in at $181.5 billion versus $177.8 billion expected. Adjusted EPS of $2.78 beat the $1.60 estimate, though a pre-tax gain from the Anthropic investment distorted the headline figure — a recurring theme across these Q1 reports.
AWS revenue grew 28% year-over-year, exceeded estimates by roughly $1 billion, and represents the fastest growth Amazon has seen in over three years. AI services at AWS now generate approximately $15 billion in annualized revenue. Online stores grew 12% year-over-year and advertising grew 24%. Q2 guidance was particularly strong, with the company guiding revenue of $194 billion to $199 billion against street expectations of $188.9 billion — a figure that includes a Prime Day pull-forward.
Capex is increasing here as well, but on the conference call Andy Jassy provided exactly the kind of clarity Meta refused to offer. He explained that 2026 capex spending will be monetized over 2027 and 2028. The market rewards that kind of explicit timeline. Margins did get squeezed and remain relatively narrow, which is a concern, but the clear vision and disciplined communication around investment returns have driven the stock higher.
Microsoft: Mixed Signals, Strong Cloud
Microsoft shares are under modest pressure despite a generally solid report. Revenue of $82.89 billion beat the $81.4 billion estimate, an 18% year-over-year increase. Adjusted EPS of $4.27 exceeded the $4.07 expectation. The bright spot is unmistakable: Azure and other cloud services revenue grew 40% year-over-year, beating estimates, and Microsoft Cloud guidance for the period ahead also exceeded expectations.
Productivity and business processes grew 17% year-over-year, while more personal computing declined 1%. The capex guide moved higher, with management providing some breakdown of where the money is going, and gross margins were impacted to the downside. Together with Alphabet, Microsoft appears to be the principal beneficiary of new enterprise cloud and AI business — these two are taking share from the rest of the field.
A Common Thread on Compute and Memory
A critical detail spans every one of these reports: each company explicitly acknowledged that rising compute costs, driven in part by surging memory prices, are fueling the upward revisions to capex. Some portion of these increases therefore reflects price adjustments in the underlying market for hardware rather than fundamentally new projects. This nuance matters for investors trying to disentangle genuine demand growth from cost inflation, and it suggests that interpreting capex headlines without context can be misleading.
The Fed: Powell Stays, Dissents Multiply
The transition at the Federal Reserve is unfolding in an unusual way. Jerome Powell will remain on the Board of Governors with two years left in his governor's term, even as Kevin Warsh prepares to take over the chairmanship. Powell offered some complimentary words at the top of his press conference but is clearly not stepping fully aside. Bond yields have priced in this arrangement without major dislocation.
The Fed held interest rates between 3.5% and 3.75%. Treasury Secretary Scott Bessent has pushed back, characterizing Powell's continued presence as a violation of chairmanship norms, though it is consistent with the rules. Powell's decision may reflect concerns about who will be appointed next, and it may also be a tactic to monitor an ongoing inspector general investigation. While the criminal investigation has been dropped, the IG inquiry continues. Politics has now fully entered the Federal Reserve.
Equally striking was the historic level of dissent at the meeting. Three governors wanted to remove the easing language from the statement, while Stephen Miran wanted to cut rates outright — four dissents in total, the most in a long time. This kind of split signals real divergence in the committee's view of the economic outlook.
Levels and Forward Risk
For the S&P 500, the relevant technical levels remain consistent with recent sessions: 7,200 to the upside, where the majority of flows are concentrated, and 7,100 to the downside. There is a slight call-side skew, but oscillators are beginning to roll over. A historical pattern worth noting: over the last three quarters, the S&P has typically traded lower one week after FOMC meetings combined with Mag 7 earnings releases. Investors should keep their heads on a swivel — the combination of strong but uneven big-tech results, an unresolved geopolitical backdrop, and a divided Fed is unlikely to produce a calm trading environment in the days ahead.