Big Tech Earnings Kick Off This Week: A Test for AI Investment Returns

As the AI optimism that pushed U.S. stock markets to all-time highs cools rapidly, Bloomberg reports that the earnings announcements from major U.S. tech companies over the next two weeks will serve as a critical test.

With the broader tech sector shaken by a sharp decline in semiconductor stocks, the S&P 500 index fell 1.6% and the Nasdaq 100 index dropped 4.1% last week.

The PHLX Semiconductor Sector (SOX) plunged 10%, marking its worst week since April 2025.

"Investors are reaching a point where they are uncomfortable with the level of spending and are worried about a bubble," said Jake Seltzer, a portfolio manager at Allspring Global Investments. "Ultimately, it is time to confirm the re-acceleration of revenue."

This suggests growing pressure on big tech companies to prove the results of their artificial intelligence (AI) investments through their earnings.

Tesla and Alphabet will kick off the big tech earnings season on July 22, followed by Microsoft and Meta Platforms on July 29, and Apple and Amazon.com on July 30.

These six stocks account for one-quarter of the S&P 500 index's market capitalization.

Alphabet, in particular, is drawing attention as its capital expenditures this year are expected to reach 187 billion dollars (approximately 280 trillion won), more than double last year's figure.

Its stock price has fallen 6.5% over the past two trading sessions, influenced by reports that the launch of its flagship model, Gemini 3.5 Pro, is being delayed.

Todd Ahlsten, Chief Investment Officer at asset management firm Parnassus Investments, said, "At some point, questions about earnings become too significant to justify high valuations," adding, "Focus will be on cloud gross margins and AI revenue per dollar of computing."

In fact, the Bloomberg Magnificent 7 (M7) index is trading at 24.0 times its projected earnings for the next 12 months, down from 33.0 times last October and 29.0 times at the beginning of the year.

The total capital expenditure for Alphabet, Microsoft, Amazon, and Meta this year is expected to reach up to 725 billion dollars (approximately 108.75 trillion won), and is projected to approach 900 billion dollars (approximately 135 trillion won) in 2027.

Investment concerns are also spreading to semiconductor stocks.

The PHLX Semiconductor Sector (SOX), which has absorbed a significant portion of AI infrastructure spending, rose 65% this year but has plunged 20% since hitting an all-time high last month, reaching the threshold for a technical bear market.

Even with positive signals in earnings reports failing to halt the downward trend, CIO Ahlsten said, "These issues make me more cautious during this period," adding, "These companies have been valued highly on the premise of accelerating growth, but in reality, it may not accelerate as much as expected."

Reflecting these concerns, Apple, which has implemented AI services through partnerships rather than large-scale capital investments, has seen the best performance among the M7 this year, with a 23% rise.

However, Allspring's Seltzer is betting that spending will continue to rise as demand for cloud computing services outstrips supply.

"It has not been uncommon for these stocks to experience sell-offs lasting weeks or months before rebounding," he said. "If it were me, I would use this weakness as a buying opportunity. The cycle is not over yet."
※ Please note: This article was translated by AI and may contain errors.