US stocks fell as tariff concerns hit tech sector

Analyst thesis

Our recommendation is based on:

• The company is structurally shifting from lower margin ecommerce towards high margin, cash-generating web services through AWS, which accounts for 18% of net sales and 57% of operating profit. AWS’s revenue contribution has increased from 13% to 18% over the past five years.

• AMZN continues to generate strong cash flow in an environment with a drag on cash due to high capex needs. Operating cash flows rose 20% over this period and we anticipate similar growth in FY26 driven by robust AWS performance.

• Demand for artificial intelligence (AI) infrastructure platforms serve as a catalyst for long-term growth in cloud and AI services.

  Various competitive advantages across business segments, including scale, cost leadership and network effects in cloud and logistics, alongside differentiation through quick delivery and exclusive access to resources such as distribution networks and vast customer data.

• Key growth drivers going forward include:

  o Continued global cloud adoption accelerated by AI.

  o Margin expansion through higher AWS and advertising growth combined with fulfilment network efficiencies and automation.

  o Ongoing logistics expansion.

  o Long-term growth projects, including an $8 billion stake in Anthropic, Kuiper, Zoox and freight services.

• Attractive valuation levels from a P:E perspective compared to its own history.

Analyst thesis

Our recommendation is based on:

• Diversified conglomerate with permanent capital advantage: Berkshire’s insurance operations generate a substantial float, providing a large, low-cost funding base that supports acquisitions and long-term investments. Its wholly owned subsidiaries span insurance, railroads, energy, manufacturing, and retail, contributing to diversified earnings and cash flows across economic cycles.

• Record cash reserves support strategic optionality: Berkshire held a record cash and US Treasury Bills at 4Q25, reflecting disciplined capital allocation and a fortress balance sheet. This substantial liquidity, combined with strong operating cash flow, provides capacity for large‑scale acquisitions and opportunistic deployment.

• Leadership transition introduces near term valuation risk: Warren Buffett’s exit creates the risk of removing a long-standing ‘Buffett premium’ from Berkshire’s valuation, reflecting his exceptional capital allocation track record. Any missteps by successor Greg Abel could lead to the shares trading at or below fair value rather than at a premium, as investors reassess management quality and execution risk.

• Valuation supported by quality and balance sheet strength: While Berkshire trades at a premium to its long-term average book value multiple, its diversified earnings base, conservative leverage and strong balance sheet provide support for steady intrinsic value growth. Relative to its quality, track record and financial resilience, we see scope for continued long-term outperformance versus the broader market.

Analyst thesis

Our recommendation is based on:

• Alphabet is successfully defending its core advertising and search engine businesses by evolving keyword-based search into conversational intent. The integration of Gemini into Search not only protects the Group's competitive position; it expands it by surfacing higher-value, targeted ads within artificial intelligence (AI) overviews.

• YouTube is undergoing a long‑term shift. Short videos (shorts) and connected TV (CTV) viewing help brands reach vast audiences and build awareness, while new shopping features allow viewers to purchase products directly from the videos. Together, this helps YouTube turn attention into sales and helps boost advertising revenue.

• Google Cloud remains the primary growth accelerator, fuelled by a $240 billion backlog. The current surge in AI workload demand is expected to unwind into a mature, high-margin utility phase by 2028.

• Alphabet has raised its 2026 CAPEX guidance to $185 billion, signalling a strong commitment to realising AI-driven gains. However, this raises concerns over the headwind to free cash flow and the time pressure to justify substantial spending and near-term returns on investment.