The Markets

Still Bullish on Big Tech

Pete Callahan, Sector Specialist, Telecom, Media, and
Technology, Goldman Sachs Global Banking & Markets
Mike Washington, Goldman Sachs Global Banking &
Markets
Date of recording: August 6, 2025

Mike Washington: This is The Markets. I'm Mike

Washington. Today is Wednesday, August 6th, and I'm on
the equities trading floor, joined by my colleague Pete
Callahan, our TMT sector specialist within the Global
Markets division. Pete, it's great to have you.

Peter Callahan: Thanks for having me, Mike.

Mike Washington: So I have to say, Pete, broadly

coming into this Q2 earnings period, it felt like expectations
were low. Tech delivered but specifically big cap tech really
delivered. What do you see in there?

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Peter Callahan: Yeah, Mike, I mean, it was a really good
set of earnings in 2Q. In aggregate, we saw accelerating
growth across ecommerce. We saw accelerating growth
across the public cloud, so think that's big cloud workloads
and then some of the AI stuff coming in. We saw
accelerating growth across US digital advertising. Again,
strong economic growth plus AI in that as well. And so the
topline story was really good in 2Q.

The other side of the story, of course, has been CapEx,

right? We continue to see numbers go up in terms of
CapEx and capital intensity as the US corporate tech sector
continues to invest in AI theme.

Mike Washington: Yeah, these CapEx numbers have

been insane. You were actually on this pod back in April,
and that was the height of tariff fears. And you pounded
the table that AI still had room to run. You've been right.
Where are we at now in this AI cycle?

Peter Callahan: Yeah, Mike, it's been quite the run for
the theme. I think semiconductors, which you could use as

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a proxy for one AI expression in the market, are up nearly
70% since the April low. So you've definitely had a big run
right now. I think it is kind of hard to call the day-to-day or
the short term, but I still think we're on a multi-year
journey, if not a decade-plus-long journey towards AI.

And so we're in year three of the story. Sure, things can

ebb and flow a little bit, but it still feel like there's more
history to write on the AI front ahead of us.

Mike Washington: Let's look in more of a macro lens. I

think the job data that we got on Friday changed the
macroeconomic backdrop quite substantially. I mean, it
feels that we're headed further down a cutting cycle where
we could potentially see three cuts as opposed to maybe
the one or two that we thought headed into that jobs print.
Where does tech fall within that? Is that a backdrop that
tech should outperform? Or are there some pockets of the
market you might be worried about?

Peter Callahan: Yeah, it's a good question, Mike. I

wouldn't say that tech is the most sort of economic policy

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sensitive sector in the market or rate sensitive sector in the
market, but there are things to think about, right? Around
the edges, lower rates can be a good thing for the tech
sector because it is a little bit more of a longer duration
type of sector. Around the edges, if economic growth
moderates a little bit, perhaps investors will pay up and
own secular growth, which the tech sector can offer.

But you do have to be careful, right? I think there's a line

where, if things slowed too much ... These companies still
are a little bit cyclical. They're still exposed to advertising
and tech spending and ecommerce and things like that.
And so if growth slows too much against this big
investment cycle we're seeing, that might be something to
watch. But I think if you did the environment we're in right
now where things are maybe a little bit cooler economic
growth-wise, maybe rates get cut in the second half, I think
that's sort of a benign backdrop for the tech sector, all else
equal.

Mike Washington: I find it interesting that we've had

this conversation but the tariffs haven't come up at all.

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Peter Callahan: Yeah.

Mike Washington: Is that because investors don't care

about tariffs at this point? Is it because tech is relatively
insulated from tariffs? Why do you think it's not a focal
point with investors that you're speaking to?

Peter Callahan: Yeah, I mean, certainly the backdrop's

changed since April, I think when the last time we spoke,
and so there are just different goalposts in terms of the
numbers investors are thinking about in terms of tariffs, so
that's a piece of it. I think a piece of it of course could be
maybe it's still too early. Maybe we don't know yet. Maybe
this just takes time to bake and play out in the US
economy.

But there are things we've seen around the edges, right?
Investors in my world are looking at things like, hey, did
this sort of drive some push-outs in decision making? Or,
hey, did this pull forward in certain pockets of
consumption and procurement? And so there are things

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sort of what I would call more second derivative effects that
have shown up, where I think the first derivatives sort of
margin impacts that investors have been concerned about,
we're still wort of waiting for that to show up.

Mike Washington: So Pete, we've talked about a lot

here, everything from AI to tariffs to macro uncertainty. If
you had to boil it all down, what's the trade in tech right
now?

Peter Callahan: Yeah, Mike. I mean, there's definitely a

little bit of near-term uncertainty. We talked about some of
this on macro. There's certainly some seasonality. I think
investors remember volatility in August and September
over the last couple of years for the tech sector. And so that
aside, if I zoom out tech, it's still only up about 10% on the
year. The sector's still growing earnings faster than the
index overall. And I'd argue it is still best positioned to
benefit from AI, so I'm still quite constructive on the US
tech sector.

Mike Washington: You mentioned that bit about a

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bigger contribution of earnings to the index level. A lot of
that is big cap tech. When you break it down, big cap tech
versus some of the smaller tech companies and you put it
in the context of the market being at all-time highs, do you
feel that mega-cap tech still has room to run from here?

Peter Callahan: Yeah, I mean, I still think large-cap tech

has room to run from here. I think the question will be: Do
you start to get that catch-up from the rest down the
second half of the year? That's really not something that
we've seen the spread between if you just looked at
NASDAQ versus NASDAQ equal weight, for example, it's
been about 10 points over the last few months, so it's really
been a large-cap tech driven rally. And so I will be watching
closely to see if you get a little bit of a catch-up trade in the
rest of the market down the stretch of the year.

Mike Washington: Awesome. And what are you going

to be watching in the weeks ahead?

Peter Callahan: Yeah, thanks, Mike. It's beginning of

August. We'll hopefully get into, you know, hopefully a little

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bit of vacation for everybody, but we still have US CPI and
retail sales next week. You're going to get a little bit of
inflation information there and a little bit of US economic
growth information. Otherwise, I'll just be watching
developments in the AI industry. We'll have Jackson Hole
later this month. And then I'm sure we'll be busy with back
to school.

Mike Washington: Pete, thanks for your insights.

Always great to hear from you.

Peter Callahan: Thanks, Mike.

Mike Washington: And that does it for this week's

episode of The Markets. I'm Mike Washington. Thanks for
listening.

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