Earnings Season Picks Up Steam This WeekStocks closed lower on Friday and for the week. The pullback in big tech/AI-related names continues. As does the additional volatility due to the escalating tensions in the Middle East. That was amplified even more over the weekend when 2 U.S. service members were killed after Iran attacked a U.S. base in Jordan. As a result, the U.S. stepped up their retaliatory strikes against Iran in the aftermath. In other news, after heady gains in tech, especially semiconductors and storage, they have seen profit-taking weigh on shares. And that has only exacerbated concerns that AI spending has peaked, and that the CapEx won't generate the expected benefits (reduce labor costs, expand margins, increase profits), anytime soon. For one, the insatiable demand for everything AI continues to grow. While no one knows for certain what the full extent of the benefit yield will be, or when – AI is here to stay. And with AI being touted as the most transformational technological breakthrough ever, I expect it will yield all of the benefits expected and more. I think we are still in the relatively early stages of the AI boom. And I believe it has years more to go. Companies like NVIDIA and Sandisk, for example, are selling the AI infrastructure (chips, servers, AI training systems, memory). Others have to buy these products to build their AI models and tools. Then those tools are sold to others to build their products, or used internally to build their own products. We are in the infrastructure phase right now, and it's only accelerating. The tools and models phase are in the early innings. And the application and productivity phase has really just begun. That's where the real broader economic payoff happens. And the winners will multiply as the cycle moves thru its stages. That's likely why legendary trader Paul Tudor Jones said in a recent interview that he believes the AI-driven bull market still has "another year or two to run," and compared it to the late 1990's tech boom. You'll remember back in 1995-1999, the market surged by double-digits for 5 years in a row due to the dot-com boom. I believe we could see the same thing again now. Last year saw the S&P 500 gain 16.4%. That was on top of 2024's 23.3%, and 2023's 24.2%. This year (2026) would be year 4, while 2027 would be year 5. But nobody says it has to stop there.
Given the sheer magnitude of the AI boom and the outlook for it touching virtually every area of business and ordinary lives, it will likely be one of the key drivers for stocks for years to come. There are plenty of other bullish catalysts for the market. Earnings season continues this week with as many as 477 stocks on deck to report, including Alphabet and Tesla on Wednesday and Intel on Thursday, to name a few. Earnings season is always an exciting time since stocks typically go up during earnings season. And this one is shaping up to be another spectacular one. Q2'26 earnings season has just begun, and is forecast to show a 25.3% EPS growth rate. That comes on the heels of last quarter's (Q1'26) stellar 25.7% EPS growth rate. Not to mention forecasts for Q3'26 at 21.1%, and Q4'26 at 23.4%. So keep the big picture in mind. Because it looks like the market has lot more upside to go. See you tomorrow,  Kevin Matras
Executive Vice President, Zacks Investment Research |
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