By Martin Baccardax
U.S. stocks are on an impressive run heading into this week's slate of earnings, with an index of semiconductor names notching its longest winning streak on record, the Magnificent Seven tech giants rising nearly 20% since late March, and the broader S&P 500 notching a series of record highs last week that pegs the benchmark well north of the 7000-point mark.
Even so, concerns linger over markets heading into this week's slate of Big Tech earnings, when five companies comprising around a quarter of the S&P 500's market value report results. How their earnings are received could challenge the current rally or extend the current run of gains well into the spring and summer months.
Microsoft, Alphabet, Meta Platforms, and Amazon.com will all post March-quarter earnings and near-term outlooks on Wednesday, just a handful of hours after the Federal Reserve's April policy meeting.
Apple will follow on Thursday, in the first quarterly update since the announced departure of CEO Tim Cook. Investors will seek a full account of the tech giant's plans to infuse artificial intelligence across its hardware and software product mix.
The earnings punctuate one of the more impressive advances for the market since the Covid pandemic. The Nasdaq has risen more than 19.4% from its late-March low, well ahead of the 12.9% gain for the S&P 500 over the same period. And the Philadelphia Semiconductor index, a chip-sector benchmark, topped the 10,000 point mark for the first time Thursday and was last marked at a 47.2% gain from its March 30 trough.
"This run has been significantly bolstered by strong earnings reports and optimistic forward guidance from key industry players, against a backdrop of hyperscaler capital expenditure expected to exceed $700 billion this year," says Deutsche Bank's Jim Reid.
"This has all reinforced the narrative of a powerful, AI-driven demand cycle," he adds. "So, the talk of an AI bubble from last year has receded for now, and the powerful growth story continues to propel the sector forward while significantly offsetting macro and market concerns around the war."
Communication services, information technology, and consumer discretionary, the three sectors that house the Mag Seven stocks and have driven around 60% of the market's post-March rebound, are expected to contribute around 47% of S&P 500 earnings over the first quarter.
The five megacap tech giants are likely to generate around $530 billion in revenue, a record high, over the three months ended in March. Analysts see that figure rising to around $552 billion over the second quarter.
"We believe renewed focus on the AI space has been a clear driver of the recent lift in stocks, with compute deals, hyperscaler capital expenditure commitments, and early semiconductor earnings reinforcing confidence in the theme's structural growth durability ahead of key Mag Seven earnings," says Anthony Saglimbene, chief market strategist at Ameriprise.
"At the same time, recent trading volume was light by historical standards, suggesting the recent move higher in stock prices has been driven, at least in part, by short covering and forced positioning adjustments rather than by fresh capital entering the market."
That observation may prove crucial, given that S&P 500 trading volumes dipped below the three billion level last week, and are trending near the lowest levels since the Covid pandemic.
Another concern: Big Tech will increase its AI capital spending in 2026 by around 56% from 2025 levels. That leaves little room for stock buybacks, a form of market support for much of the past decade.
"The AI story is entering a more demanding phase," says Charu Chanan, chief investment strategist at Saxo Bank. "Earlier this year, investors worried hyperscalers were building too much AI infrastructure, too quickly, with capex rising sharply and the revenue flywheel still unclear."
That tone has shifted, she says, from a market that no longer rewards AI ambition alone, but one that "now wants evidence that spending is still producing durable growth, stronger earnings, and clearer returns on investment."
"Investors can still forgive big spending," Chanan adds. "They may be far less willing to forgive vague spending."
That assessment may both define the market's recent gains and establish how investors see performance heading into the summer months and beyond.
"U. S. Big Tech now dominates global indices to the point where a handful outweigh most countries, while the AI 'picks and shovels' trade is near the value of the platform layer it supports," says Nicholas Colas, co-founder at DataTrek Research. "Together, this reflects a market that rewards near-term earnings visibility but is also still pricing in long-term AI-driven growth."
Write to Martin Baccardax at martin.baccardax@barrons.com
This content was created by Barron's, which is operated by Dow Jones & Co. Barron's is published independently from Dow Jones Newswires and The Wall Street Journal.
(END) Dow Jones Newswires
April 27, 2026 01:00 ET (05:00 GMT)
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