Key facts
- Alphabet and Intel earnings reports are anticipated this week, with a focus on AI spending.
- The S&P 500 is up 10% in 2026, supported by strong corporate profit expectations.
- S&P 500 earnings are projected to increase by 25.7% in the second quarter.
- Alphabet's AI capital spending is a key factor influencing the AI trade and related sectors.
- Chip stocks, including Intel and Texas Instruments, have experienced significant rallies but face questions about sustainability.
- Major U.S. banks reported strong earnings driven by M&A advisory and trading revenue.
U.S. corporate earnings season is gaining momentum, with a particular focus on tech giants Alphabet and Intel, whose upcoming reports could significantly influence the market's dominant artificial intelligence trade. Investors are closely watching these results to gauge whether companies can meet elevated profit expectations, which have underpinned the U.S. stock market's resilience despite geopolitical uncertainties, including the ongoing conflict in the Middle East.
The S&P 500 has shown strength, nearing record highs with a 10% gain year-to-date, driven by robust corporate fundamentals. Projections indicate a substantial 25.7% increase in S&P 500 earnings for the second quarter, according to LSEG IBES data. Analysts note that resilient fundamentals and outstanding earnings have been key drivers of the market's upward trajectory.
Alphabet's report on Wednesday is expected to provide critical insights into AI spending trends. As a major AI "hyperscaler" investing billions in data centers and infrastructure, any indication of spending pullbacks by the Google parent could have ripple effects across the entire AI ecosystem. This is particularly relevant as AI capital expenditures have fueled significant gains in semiconductor and related companies.
Semiconductor firms Intel and Texas Instruments are also under scrutiny. Despite recent volatility, the Philadelphia SE Semiconductor index remains up approximately 68% for the year, with Intel shares surging over 160% and Texas Instruments gaining 68%. However, tepid market reactions to strong reports from international chipmakers like Samsung Electronics and Taiwan Semiconductor suggest that expectations for the sector are already very high, leading to questions about whether the rally has gone too far.
Other notable companies reporting earnings include Tesla, American Express, Philip Morris International, and RTX. Major U.S. banks have already kicked off the season, posting strong results bolstered by merger and acquisition advisory fees and increased trading revenues.
Market participants remain watchful of Middle East developments, which could trigger daily swings and potentially impact energy prices and inflation, especially ahead of the Federal Reserve's late July meeting. While recent inflation data has calmed fears of an immediate rate hike, expectations persist that the central bank may increase interest rates in the coming months to curb inflation above its 2% target.