Market Context: Geopolitics and Capital Spending Weigh on Tech
Recent volatility in large-cap technology stocks has emerged as a potential entry point for long-term investors. The sector is currently under pressure due to escalating geopolitical tensions linked to the Iran war, which have sparked fears of supply chain disruptions, rising energy costs, and potential interest rate hikes.
Compounding these macroeconomic headwinds is investor scrutiny over elevated capital expenditure plans among major technology firms. Market participants are actively weighing the scale of these investments against the timeline for returns, a dynamic contributing to downward pressure on valuations.
Microsoft (MSFT): AI Infrastructure and Cloud Dominance
Despite current market headwinds, analyst sentiment toward Microsoft remains constructive, with both MSFT and Amazon holding a "Strong Buy" consensus rating. Analysts view the recent price correction as an accumulation opportunity driven by solid structural demand in their core segments.
Microsoft's stock has declined more than 32% from its 52-week high. This drop reflects investor concerns regarding rising capital expenditures and customer concentration tied to OpenAI. A significant portion of Microsoft's backlog is linked to OpenAI-related agreements, raising questions about revenue diversification within its cloud business.
The company is aggressively investing in AI infrastructure, focusing on high-performance hardware like GPUs and CPUs alongside global data center expansion. While these investments are expected to pressure margins in the near term, they establish a foundation for long-term opportunities in cloud computing and AI.
Financial Performance and Outlook
Supporting this higher spending are robust demand trends:
- Q2 Revenue: Increased 17% year-over-year (YoY).
- EPS: Rose 24% YoY.
- Microsoft Cloud: Generated $51.5 billion in revenue, up 26% YoY.
- Intelligent Cloud Segment: Delivered robust results with revenue rising 29% to $32.9 billion.
- Azure Growth: Grew 39%, slightly below the prior quarter's 40% growth, primarily due to capacity constraints rather than weakening demand.
Demand for cloud and AI services continues to exceed available infrastructure. For the third quarter, Microsoft forecasts total revenue between $80.65 billion and $81.75 billion, implying growth of 15% to 17%. Intelligent Cloud revenue is projected at $34.1 billion to $34.4 billion, with Azure expected to grow 37% to 38% in constant currency.
Although approximately 45% of MSFT's $625 billion remaining performance obligation (RPO) is tied to OpenAI, the rest of the backlog grew 28%, highlighting diversified demand. The consensus price target of $594.84 implies about 55% upside potential over the next 12 months.
Amazon (AMZN): Massive CapEx and AWS Acceleration
Amazon shares have declined approximately 19% from their 52-week high following management's announcement of a substantial increase in capital expenditures through 2026. The company expects to invest approximately $200 billion, with the majority allocated to Amazon Web Services (AWS).
This marks one of Amazon's largest investments. However, the scale of spending reflects significant growth opportunities led by demand across cloud computing, AI, custom silicon, robotics, and satellite infrastructure.
AWS Growth and Diversification
AWS continues to be a primary profit driver with accelerating growth:
- Q4 Revenue: Rose 24%, up from 20% in the prior quarter.
- Sequential Increase: Up by $2.6 billion, nearly $7 billion YoY.
- Run Rate: Operating at an annualized revenue run rate of approximately $142 billion.
Within AWS, Amazon's proprietary chips, including Graviton and Trainium, have surpassed a $10 billion annual revenue run rate and are expanding at triple-digit rates. Traditional cloud workloads are also gaining momentum as enterprises accelerate infrastructure migration.
Beyond cloud, Amazon's advertising business remains a high-margin growth driver, with revenue increasing 22% in the fourth quarter and contributing over $12 billion in incremental revenue during 2025. Retail operations are improving through enhanced fulfillment efficiency and cost optimization.
While higher capital expenditures may pressure near-term margins, they position AMZN to capture strong demand and drive rapid monetization of new capacity. The consensus price target of $284.75 implies roughly 36% upside potential.
Takeaway
Despite short-term volatility driven by geopolitical risks and heavy investment cycles, Microsoft and Amazon demonstrate resilient fundamentals. With Azure and AWS showing double-digit growth rates and diversified backlogs, analysts view the current valuation dip as a strategic opportunity for long-term accumulation, projecting significant upside over the next 12 months.
*Disclaimer: On the date of publication, Amit Singh did not have (either directly or indirectly) positions in any of the securities mentioned in this article. All information and data in this article is solely for informational purposes.*
Original source
Big Tech Sell-Off Opportunity: 2 ‘Strong Buy’ Stocks to Buy Now
Published: Mar 24, 2026
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