The focus is on the “Magnificent 7” as Meta, Microsoft, Amazon, and Alphabet prepare to report earnings after the US market closes today. This earnings season follows a strong rally in the tech sector, with the Nasdaq and S&P 500 reaching record highs. Collectively, these companies have surged 18% in the past month, but the upcoming reports could significantly influence the AI trade and the broader market momentum.
Investors are particularly interested in capital spending plans, as these figures may hold more weight than revenue numbers this quarter. Microsoft, Meta, Amazon, and Alphabet are expected to announce substantial capex commitments, totaling around $600 billion for AI investments this year. However, any indication of a slowdown in spending could lead to a sell-off in the tech sector, impacting not just these companies but also their suppliers in the semiconductor industry.
As the market anticipates these earnings, the options market is pricing in volatility, with potential moves of 4% for Amazon and 7% for Meta. The stakes are high: these results will test whether the hyperscalers can demonstrate that their AI investments are paying off, and any signs of weakness in advertising revenue could further shake investor confidence.
Source: xtb.com