Tech profit squeeze has MFS manager eyeing industrials, software and booze
MFS strategist Robert Almeida says rising costs could pressure tech margins and favors industrials, life-science tools and drinks stocks.
By Frankie Delgado · News Reporter
3 min read
A tech profit squeeze may be the bigger stock-market story than the Federal Reserve’s next move, according to Robert Almeida, chief global investment strategist at MFS Investment Management.
Almeida told MarketWatch that investors are spending too much energy on the Fed’s rate decision and not enough on what companies can earn on the capital they are pouring into artificial intelligence and other projects over the next six to 18 months.
His view is blunt: labor, funding costs and competition are likely to put pressure on company margins. He said MFS entered 2026 believing profit margins were too elevated to last, and he sees this year’s wobbling in technology and AI-related shares as an early sign that investors are starting to question the payoff.
Almeida, who also manages the MFS Diversified Income fund, said the fund has been light on technology for some time because its job is to generate income. That stance has carried a cost. MarketWatch reported the fund has returned an annualized 3.8% over five years, while the S&P 500 has returned 12.6% over the same period.
What stocks does Robert Almeida like?
Almeida told MarketWatch he prefers what he calls compounders: companies that can grow earnings at an above-average pace over time. He said MFS is underweight cyclical businesses, including technology hardware companies that have benefited from AI spending but could face oversupply later.
His industrial picks include Amphenol, Schneider Electric, TE Connectivity, Honeywell and Assa Abloy. Almeida said some of those companies trade at 30 to 40 times earnings, a valuation he said reflects broader growth prospects beyond the current AI build-out.
These are not the flashiest AI names on the board. Almeida’s case is that they provide parts and systems needed for data centers, electric-vehicle factories and other infrastructure projects. In his telling, the picks are the nuts-and-bolts winners rather than the spotlight stocks.
Why is he cautious on AI hardware?
Almeida compared the AI investment cycle with the lead-up to the 2008 financial crisis in a recent MFS strategy note, according to MarketWatch. His point was not that AI companies must become unprofitable to cause trouble, but that doubts about returns at major model providers such as Anthropic or OpenAI could ripple through the supply chain.
He said investors are already looking ahead to possible memory oversupply in 2028, with China competition or slower AI capital spending among the risks if returns fall short of expectations.
Almeida still sees opportunity in software, especially companies he says do not need much growth to reward shareholders. He named Salesforce, MongoDB and Pegasystems as businesses that provide infrastructure around AI and are harder to displace where specialized knowledge matters.
He also favors life-science tools companies such as Danaher and Thermo Fisher, saying they can supply key instruments for AI-driven drug discovery. Almeida told MarketWatch the group has been out of favor for the past five years and said MFS has been overweight the area for more than two decades.
His list ends with a decidedly old-school corner of the market: drinks. Almeida said he likes consumer-staples names including Diageo and Pernod Ricard, arguing that the market has pushed a mistaken view that younger consumers will stop drinking altogether. He said those stocks are inexpensive and only need growth around the pace of gross domestic product to deliver above-average returns.
This story draws on original reporting from MarketWatch.