'Earnings need to be strong': Wall Street assesses next catalyst for AI trade
Yahoo Finance ·
'Earnings need to be strong': Wall Street assesses next catalyst for AI trade Ines Ferré · Senior Business Reporter Sun, July 19, 2026 at 8:08 AM EDT 3 min read Wall Street will need strong earnings to shake off recent market jitters around AI. This season is expected to mark the second consecutive quarter of 20%-plus earnings growth for the S&P 500 ( ^GSPC ), with the AI trade driving much of that momentum. "The bar is pretty high," Sylvia Jablonski, Defiance ETFs chief investment officer, told Yahoo Finance this past week. The artificial intelligence trade has taken some hits over the past week, with semiconductor stocks declining further into bear-market territory following their parabolic rally this year. Over the past five sessions, memory chip highfliers Micron Technology ( MU ) and SanDisk ( SNDK ) have dropped more than 10% and 25%, respectively. "The golden child of this AI revolution, over the last few months, is memory stocks," Yorkville Ives partner Dan Ives told Yahoo Finance. "We're going to go through these rotations in this AI revolution as it plays out," he added. "It comes down to earnings season. You have to show the monetization piece, because right now it's just capex." Hyperscalers are set to spend a collective $650 billion on AI infrastructure this year. As earnings season picks up, investors are looking for evidence of a return on those investments. Alphabet ( GOOGL , GOOG) will be the first of the Big Tech players to report on Wednesday. "Their earnings need to be strong," Principal Asset Management chief global strategist Seema Shah said of the hyperscalers. "They are really the foundation for the entire AI ecosystem." Concerns over rising capital expenditures have rippled through the AI trade. Taiwan Semiconductor Manufacturing ( TSM ) stock moved lower last week after it raised its capital spending plans to expand capacity, partly due to rising equipment costs. However, the world's largest contract chipmaker also hiked its revenue guidance due to strong demand. Equipment supplier ASML ( ASML ) likewise issued a bullish forecast as chipmakers continue buying its advanced equipment. "I think it's a real vote of confidence for the AI trade," said Defiance's Jablonski, who added that AI represents a multitrillion-dollar addressable market. But not all tech is benefiting from the boom. IBM ( IBM ) shares suffered their steepest decline in decades after the company warned that enterprise clients are prioritizing spending on memory and AI infrastructure over mainframe computers and traditional software. On the other hand, cybersecurity stocks got a boost after IBM noted that clients are focusing on security concerns amid surging use of agentic AI. "It has become a case of dispersion of winners and losers and really that stock selection becomes increasingly important at this point of this cycle," said Shah. Worries over rising competition from China and reaccelerating inflation due to the Iran war have injected a dose of volatility into the market. For now, softer-than-expected inflation data has eased those concerns, and Wall Street largely expects interest rates to remain unchanged this year. "I think the AI trade is intact and so I'd stay on target," Fundstrat's Tom Lee said in a client video. "We continue to buy the dip." Lee expects the S&P 500 to move toward 7,700 in the near term, then pull back and recover. UBS maintains a year-end price target of 7,900 for the broad-based index. The firm's strategists noted that nearly all sectors have posted gains year to date, with further upside expected. "We believe market gains will remain relatively broad over the course of the year," wrote David Lefkowitz, head of US equities at UBS. Sectors expected to see additional upside include Consumer Discretionary ( XLY ), Financials ( XLF ), Health Care ( XLV ), Industrials ( XLI ), and Utilities ( XLU ). Ines Ferre is a senior business reporter for Yahoo Finance. Follow her on X at @ines_ferre . Read the latest financial and business news from Yahoo Finance
AI 시장 분석
With S&P 500 companies expected to post over 20% earnings growth for the second consecutive quarter, Wall Street is demanding proof of performance from AI-related stocks. The core focus is whether the $650 billion infrastructure investment by hyperscalers will translate into actual profits. Investors should adopt a selective approach while verifying AI monetization amidst market volatility.
상승 영향
- Cybersecurity — Accelerated AI adoption is driving a surge in corporate security demand. As noted by IBM, the rising use of agentic AI creates new vulnerabilities, fueling expected growth for security providers.
- Semiconductors — TSM and ASML have raised revenue guidance due to strong demand. Despite short-term price corrections, the demand for AI infrastructure equipment remains robust, providing sufficient long-term upside.
하락 영향
- Legacy Software — Companies are prioritizing budgets for memory and AI infrastructure, leading to reduced spending on mainframes and traditional software. Similar to IBM, concerns remain regarding sluggish performance among established IT infrastructure firms.
DYAX 전담 분석
Market participants are shifting their attention from mere AI optimism to tangible financial results. The massive capital expenditures by hyperscalers have set a high bar for software and hardware providers to demonstrate clear paths to revenue generation. Consequently, stock performance is becoming increasingly decoupled based on execution capabilities rather than sector-wide tailwinds.
AI가 생성한 분석으로 투자 자문이 아닙니다.
DYAX Investor Sentiment
Bullish (Long) 47% · Bearish (Short) 53%
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