Accelerating cloud vendor growth is not fully priced in, and low positioning creates room for tech stock recovery

Overview

The report focuses on four main themes: hyperscaler earnings, transmission effects to China internet, coordinated yen intervention, and equity positioning. The core view is that U.S. cloud vendors’ revenue, backlog, and new recurring revenue are accelerating simultaneously, while strong post-earnings share price reactions show that the market had not fully priced in this change. Chinese cloud computing platforms have multi-year upside potential for EPS, but they are still at the stage of waiting for management to prove monetization capability. After equity deleveraging, positioning indicators have fallen back to attractive ranges. This material is provided by J.P. Morgan’s Sales and Trading department, and the text clearly states that it is not an independent research report from the Research department.

Core views

First, the growth and pricing power of U.S. hyperscalers are strengthening, and compute shortages put platforms with available computing resources in an advantageous position. Second, 2026 may be the peak year for year-over-year capital expenditure intensity, and if revenue growth exceeds expense growth in 2027, operating leverage will be released. Third, Alibaba and Tencent are expected to benefit from China’s push to popularize AI in industrial and consumer applications, but they need to deliver acceleration in revenue and EPS. Fourth, U.S.-Japan coordinated intervention can restrain USD/JPY from continuing to rise rapidly, but the BOJ’s failure to raise rates weakens the basis for sustained yen appreciation; historically high yen short positioning may still trigger a short-term rebound. Fifth, after deleveraging in U.S. and Asia Pacific equities, positioning and net leverage indicators have formed a tactical bullish signal.

Analysis framework

The report combines post-earnings price reactions, cloud business revenue and remaining performance obligations, the capital expenditure cycle, equity positioning z-score indicators, hedge fund net leverage, FX intervention policy, and macro rates changes to make cross-asset judgments, and uses earnings events and policy catalysts to test whether the themes can be realized.

Methodology notes

• Market pricingPost-earnings price reaction analysis

  Assess whether market expectations were sufficient by examining abnormal price gains after better-than-expected earnings

  AMZN and MSFT rose sharply by about 14% to 15% after earnings, indicating that the acceleration in cloud business growth had not previously been fully priced in by investors.

• Fundamental analysisComparison of revenue, remaining performance obligations, and capital expenditure growth

  Compare the growth rates of revenue, backlog, and capital expenditure to judge future growth and operating leverage

  Remaining performance obligations are growing faster than revenue and capital expenditure, implying improved visibility for future revenue; if capital expenditure intensity peaks, profit margins may improve thereafter.

• Positioning analysisTactical positioning z-scores and net leverage thresholds

  Use historical percentiles and z-score changes to identify contrarian trading opportunities after deleveraging

  The U.S. tactical positioning indicator has fallen to the 20th percentile, its four-week change has dropped to -1.5 standard deviations, and the eight-week decline in hedge fund equity long/short net leverage has reached -2 standard deviations, all of which are viewed as bullish signals.

• Macro policyAssessment of FX intervention sustainability

  Differentiate the short-term price impact of administrative intervention from the long-term exchange-rate impact of monetary policy

  Coordinated U.S.-Japan buying of yen may prompt short covering, but with the BOJ keeping rates unchanged, the intervention looks more like a temporary measure to limit depreciation.

Asset mapping & comparison

Structured mapping from thesis to named assets (strengths, weaknesses, peers, risks).

• AMZN, MSFT, and Google Cloud-related assets

  Core positive beneficiaries

  Strengths

  Cloud revenue and new annual recurring revenue are accelerating, remaining performance obligations are ample, compute shortages bring pricing power, and operating leverage may be released in 2027.

  Weaknesses

  Capital expenditure remains high, and the market’s requirements for growth sustainability are rising.

  Comparison

  Compared with Chinese cloud vendors, their revenue and AI monetization have already been validated in current earnings.

  Risks

  Shortages of computing power and components, capital expenditure returns falling short of expectations, and rising rates causing valuation compression for growth stocks.

• Alibaba (BABA) and Tencent

  Conditional positive transmission

  Strengths

  China is promoting AI applications in industrial and consumer end-markets, and cloud businesses have multi-year growth and EPS upside potential; current technical trends have improved.

  Weaknesses

  After about five years of profit stagnation, the market still lacks clear evidence of monetization and EPS acceleration.

  Comparison

  The growth thesis is similar to that of U.S. hyperscalers, but realization is clearly lagging.

  Risks

  Earnings fail to show improvement in core revenue and profits, returns on AI investment are low, and competition and policy changes.

• JPY

  Bullish in the short term, neutral to weak in the long term

  Strengths

  U.S.-Japan coordinated intervention and historically high speculative short positioning may trigger rapid covering.

  Weaknesses

  The BOJ has not provided sustained policy support through rate hikes, and the announcement effect of intervention may be limited.

  Comparison

  Administrative intervention is more likely to set a floor for the yen than to start a sustained appreciation trend.

  Risks

  USD/JPY breaks above 160 again, intervention effectiveness fades quickly, or interest rate differentials continue to widen.

• U.S. and Asia Pacific equities

  Tactically bullish

  Strengths

  Positioning, four-week changes, and hedge fund net leverage indicators have all fallen to historically low or bullish-threshold levels.

  Weaknesses

  Fundamental divergence is clear, and stocks that miss earnings expectations face sharp declines.

  Comparison

  Positioning recovery is more favorable for technology and growth stocks, but rising rates volatility would weaken this advantage.

  Risks

  Rates volatility, renewed deleveraging, geopolitics, and crowded trades in high-beta assets.

• COIN, RDDT, RBLX

  Negative examples of earnings misses

  Strengths

  They have structural growth exposure to crypto trading, internet communities, and digital entertainment platforms, respectively.

  Weaknesses

  COIN EBITDA missed expectations, RDDT lacked new data licensing agreements, and RBLX daily active users were below expectations.

  Comparison

  This forms a sharp contrast with cloud vendors’ strong post-earnings gains, showing that the market has very low tolerance for earnings missteps.

  Risks

  Downward revisions to earnings expectations, slowing user growth, and regulatory and platform safety measures affecting monetization.

• Gold

  Under short-term pressure

  Strengths

  Geopolitics and safe-haven demand still provide potential support.

  Weaknesses

  Rising real rates pushed gold below $4,100.

  Comparison

  Compared with equity positioning recovery opportunities, gold is more constrained by real yields in the short term.

  Risks

  U.S. rates continue to rise, the dollar strengthens, and safe-haven demand declines.

Key data

• Remaining performance obligations of the three major cloud vendorsApproximately $1.7 trillionUp 152% year over year, indicating a significant improvement in future cloud revenue visibility.
• New annual recurring revenue from cloud businessesMore than 60% above the prior single-quarter recordAWS, Azure, and Google Cloud all reached this level in the second quarter.
• Cloud vendors’ revenue beatApproximately 200 basis pointsAMZN and MSFT both exceeded buy-side expectation thresholds for second-quarter revenue.
• AMZN post-earnings gainApproximately 14% to 15%The strong price reaction is viewed as evidence that growth acceleration was not fully priced in.
• MSFT post-earnings gainApproximately 15%Reflects improved expectations for Azure growth and AI monetization.
• AMZN target price$365Corresponds to approximately 35% expected upside.
• Alibaba gain from the lowApproximately 50%Technical momentum has improved, but EPS recovery is still needed to support further upside.
• Japan FX intervention scale year to dateMore than ¥15 trillionAlready exceeds the scale of intervention in 2024.
• Bank of Japan policy rate1%Rates were kept unchanged on the day of intervention.
• End-2026 USD/JPY forecast164Reflects strategists’ view that room for sustained, substantial yen appreciation is limited.
• U.S. tactical positioning monitor-0.6 standard deviations / 20th percentileHas fallen back to an historically low and attractive range.
• Four-week change in U.S. tactical positioning-1.5 standard deviationsHas reached the tactical bullish threshold defined in the report.
• Eight-week change in hedge fund equity long/short net leverage-2 standard deviationsIndicates room for positioning recovery after significant deleveraging.
• China’s six major network investment planApproximately RMB 7 trillionCovers AI computing power, power grids, communications, water supply, urban underground pipelines, and logistics networks.

Impact & implications

At the portfolio level, investors can prioritize U.S. hyperscalers that have validated revenue acceleration through earnings, have sufficient orders, and still offer attractive valuation and positioning. China internet is more suitable for an event-driven and earnings-validation strategy, waiting for cloud revenue, core business revenue, and EPS to recover simultaneously. For the yen, the long-term direction remains constrained by BOJ policy, but high short positioning means the risk of chasing shorts has risen. Overall low equity positioning is favorable for a rebound, but if concerns about the Federal Reserve’s credibility push rates volatility higher, high-beta, momentum, and crowded growth stocks may become the main channels of risk transmission.

Risks

• Cloud computing demand or AI monetization may fall short of expectations, causing high capital expenditure to fail to translate into profit growth.
• Rates volatility becomes a cross-asset risk transmission mechanism, and high-beta, momentum, and crowded growth stocks may suffer concentrated selling.
• A decline in the credibility of Federal Reserve communication and inflation targets could trigger a sharp rise in bond yields and bearish steepening of the yield curve.
• China internet companies fail to deliver growth in core revenue and EPS, potentially invalidating the positive transmission thesis.
• FX intervention lacks monetary policy coordination, so a yen rebound may be short-lived and USD/JPY may still face upside risk.
• Shortages of computing power, chips, and components may limit cloud business expansion and lead technology hardware companies to lower guidance.
• Geopolitical conflicts and renewed deleveraging may interrupt the recovery in equity positioning.

What to watch

• Tencent’s earnings on August 12 and progress in AI and cloud business monetization.
• Alibaba’s cloud revenue, core business growth, and EPS recovery in earnings this month.
• Whether AWS, Azure, and Google Cloud can continue to accelerate new annual recurring revenue and remaining performance obligations.
• Whether capital expenditure intensity peaks in 2026, and whether the gap between revenue and expense growth can widen in 2027.
• Policy reactions around USD/JPY 160, the pace of yen speculative short covering, and BOJ rate hike signals.
• Whether U.S. tactical positioning indicators, hedge fund net leverage, and Asia Pacific deleveraging reverse.
• The impact of U.S. two-year and ten-year yields, real rates, and rates volatility on growth stocks and gold.
• The implementation pace of China’s six major network investment plan and beneficiaries of AI computing infrastructure.