Deutsche Bank Traders See Tech Rally as Real, Led by Capex Cycle
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Fazen Markets Editorial Desk
Collective editorial team · methodology
Fazen Markets Editorial Desk
Collective editorial team · methodology
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Deutsche Bank's head traders say the technology stock rally is a real fundamental shift, not speculative froth. The assessment came from Ozan Tarman, vice chair of global macro, and Aditya Singhal, head of emerging markets trading across rates, FX, and credit. In a Bloomberg Odd Lots podcast recorded in London on 19 May 2026, the executives detailed their framework for separating market-moving signals from transient financial news noise. They identified corporate capital expenditure as the primary driver of current equity valuations, arguing the trend has staying power absent a major shock to corporate earnings or interest rates.
The current rally in U.S. technology stocks echoes the late-2024 surge, when the Nasdaq 100 gained 24% in a single quarter as interest rate cut expectations took hold. The market now trades in an environment where the S&P 500 hovers near 5,800 and the Federal Reserve's policy rate remains above 4.75%. The primary catalyst for the current leg higher is a resurgence in corporate capital expenditure, specifically in artificial intelligence hardware, data center infrastructure, and energy transition technologies.
This spending cycle is self-reinforcing. Companies investing heavily in automation and efficiency are seeing margin expansion, which in turn funds further investment. The cycle is broad-based, extending beyond the traditional mega-cap technology firms into industrial and energy sectors. The market narrative has shifted from pure multiple expansion to a focus on tangible earnings growth driven by productivity-enhancing investments.
Capital expenditure growth for S&P 500 companies accelerated to 12% year-over-year in Q1 2026, according to Bloomberg Intelligence data. This marked the fourth consecutive quarter of double-digit capex growth, a run not seen since the pre-financial crisis period of 2006-2007. The tech-heavy Nasdaq 100 has returned 18% year-to-date, outperforming the S&P 500's 9% gain over the same period. Microsoft and Nvidia alone have contributed over 35% of the S&P 500's total return in 2026.
| Metric | Q1 2025 | Q1 2026 | Change |
|---|---|---|---|
| S&P 500 Capex Growth (YoY) | 7.2% | 12.1% | +4.9 ppts |
| Nasdaq 100 Forward P/E | 24.5x | 26.8x | +2.3x |
| 10-Year Treasury Yield | 4.18% | 4.52% | +34 bps |
The resilience of tech valuations is notable given the parallel 34 basis-point rise in the 10-year Treasury yield to 4.52%. Historically, such a rate move would pressure growth stock multiples. The divergence suggests earnings growth expectations are rising faster than discount rates.
Second-order beneficiaries of the tech capex boom include industrial automation firms and utilities. Companies like Rockwell Automation (ROK) and Eaton (ETN) have seen order books swell by over 20% this year, servicing data center and factory build-outs. Utilities such as NextEra Energy (NEE) and Constellation Energy (CEG) are direct plays on power demand for AI infrastructure, with projected earnings growth revised upward by 15% in recent months.
The primary risk to this thesis is a sharp contraction in corporate profit margins. If input cost inflation reaccelerates faster than productivity gains, the return on new capital investment would fall, potentially halting the cycle. Current institutional positioning reflects a bullish but selective stance. Hedge fund net exposure to the technology sector is near five-year highs, but flows show a distinct rotation into semiconductor capital equipment firms like Applied Materials (AMAT) and industrials over pure software names.
Key catalysts for confirming or disrupting the capex narrative include the Q2 2026 earnings season starting in mid-July and the Federal Reserve's policy meeting on 18 June. Markets will scrutinize guidance from industrial conglomerates like Honeywell (HON) and capital goods suppliers for any sign of order deceleration. Technical levels to monitor include the Nasdaq 100's 50-day moving average, currently at 18,450, which has acted as dynamic support during the current uptrend.
A sustained move above 27,000 for the Nasdaq 100, coupled with stable or rising capex guidance, would validate the cycle's strength. Conversely, a break below the 17,800 support level on heavy volume would signal a broader reassessment of growth expectations. The direction of the U.S. dollar, particularly DXY movements above 106.00, will also influence multinational tech earnings forecasts.
Professional desks use automated sentiment analysis on headline flows but anchor decisions to a core set of 5-10 high-frequency macro catalysts. These include central bank meeting minutes, monthly non-farm payrolls data, and inflation prints like the CPI and PCE. Deutsche Bank's team cross-references news sentiment against real-time price action in Treasury futures, currency markets, and credit default swaps to gauge true market impact, often ignoring headlines that fail to move these foundational asset classes.
A capital expenditure-driven rally tends to be more durable than one driven by speculative momentum or liquidity, as it is tied to physical investment and long-term corporate planning. For retail investors, this means sector selection becomes critical. The benefits extend beyond FAANG stocks to industrial, material, and energy sectors involved in the supply chain. Investors should focus on companies with strong free cash flow generation that are actively reinvesting in their businesses, rather than those simply buying back shares.
Fundamental differences are stark. The Nasdaq 100's forward price-to-earnings ratio was over 100x at the 2000 peak, compared to roughly 27x today. Today's largest tech firms generate immense profits and cash flows, with an aggregate free cash flow yield for the sector near 3.5%. In 2000, many leading companies were unprofitable. The current cycle is backed by measurable productivity gains and widespread enterprise adoption of new technologies, unlike the speculative retail frenzy that characterized the earlier period.
The technology rally is fundamentally supported by a corporate investment cycle with measurable economic impact beyond financial markets.
Disclaimer: This article is for informational purposes only and does not constitute investment advice. CFD trading carries high risk of capital loss.
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