Tech Stocks Rally as AI Fuels Earnings Optimism: Markets Wrap
(Bloomberg) — A rally in the world’s largest technology companies left stocks at all-time highs amid speculation that artificial intelligence will keep driving earnings for the group that has powered the bull market.
While most sectors in the S&P 500 took a breather after a three-day advance, the cohort of tech megacaps kept powering ahead. Microsoft Corp. climbed 2.5% after finalizing a new agreement with OpenAI that will give the software giant a 27% ownership stake worth about $135 billion. Apple Inc. briefly topped $4 trillion. Nvidia Corp. gained before Jensen Huang’s keynote address.
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On Wednesday and Thursday, five big techs that account for about a quarter of the US benchmark will report earnings. Investors will be looking for assurances that the flow of tens of billions of dollars for computing infrastructure will continue — and ultimately pay off down the road.
“This group has repeatedly reassured investors that the AI theme is alive and well, and given the number of deals that have been announced over the past few months, it seems likely that this narrative will continue so long as Wall Street rewards them for this approach,” said Bret Kenwell at eToro.
Aside from earnings, policymakers in Washington will take the spotlight, with a widely anticipated quarter-point reduction from the Fed on Wednesday. Trade headlines also remain in focus, with President Donald Trump’s Thursday sit-down with Chinese President Xi Jinping watched most closely.
The S&P 500 hovered near 6,880. The yield on 10-year Treasuries was little changed at 3.98%. The dollar wavered.
The Magnificent Seven is projected to deliver profit growth of 14% in the third quarter, down from 27% in the second quarter, according to data compiled by Bloomberg Intelligence. That’s nearly twice the 8% expected profit growth for the broader S&P 500, but it also would be the slowest pace since the first quarter of 2023.
However, Big Tech firms have a history of reporting earnings that far exceed Wall Street estimates. And that’s what many investors are counting on.
“We expect another strong round of mega cap tech earnings reports, given the relentless demand for AI technology and infrastructure,” said Clark Bellin at Bellwether Wealth. “While profitability in AI remains an unknown, investors for right now are willing to overlook this as the AI arms race heats up”.
The stock market’s record highs leave little room for disappointment when it comes to big tech earnings, according to Paul Stanley at Granite Bay Wealth Management.
“Given how so much of the S&P 500’s market cap consists of Magnificent Seven names, if any of these earnings reports disappoint, that could cause a stock market selloff or keep the market range-bound for the foreseeable future until we see the next catalyst,” he said.
Nasdaq 100 positioning has increased significantly as investors add new long risk, reversing the fading momentum seen in recent weeks, according to Citigroup Inc. strategists. That ensures that tech remains among the most-crowded sectors, they say.
As for the S&P 500, a Citi team led by Chris Montagu wrote that $2.7 billion of risk was added to the benchmark, through a mix of short covering and new longs. Meanwhile, US small caps face a heightened chance of profit taking as positioning has become extended, the strategists noted.
The tech-heavy Nasdaq 100 is also now almost 18% above its 200-day moving average, noted Peter Boockvar, author of The Boock Report. That’s the most since July 2024 when it got to 20% right before a 13% correction, he said.
“The markets are once again pressed into overbought/extended territory across multiple time frames,” said Dan Wantrobski at Janney Montgomery Scott. “We remain on high alert for a correction in the magnitude of 5% to 10% before 2025 closes out.”
Yet he also noted that November overall has historically been one of the best months for US equities, per the Stock Trader’s Almanac.
“An increasing number of investors are growing concerned that the strong stock gains seen over recent months may have outpaced fundamentals, at least in the very near term,” said Anthony Saglimbene at Ameriprise. “This week’s Mag Seven earnings reports provide a chance for companies to either confirm or challenge that view.”
Speaking of size, he noted that at no other time over the last 35 years have the top 10 companies by market-cap in the S&P 500 held so much influence on one of the broadest measures of the US stock market.
“Overall, we believe the Mag Seven is well-positioned to meet profit expectations for the prior quarter,” Saglimbene noted. “However, given current valuations and the size and influence these companies currently hold over the broader market, it’s their outlooks and views on profitability moving forward that will likely carry the most sway with investors this week, and probably beyond.”
Corporate Highlights:
Amazon.com Inc. plans to eliminate roughly 14,000 corporate jobs just months after Chief Executive Officer Andy Jassy warned that AI will shrink the company’s workforce. Intel Corp. Chief Executive Officer Lip-Bu Tan said he is working to “refocus” the beleaguered chip company on engineering after its struggles with complacency and mismanagement. United Parcel Service Inc. smashed Wall Street’s profit expectations by cutting costs and eliminating 34,000 jobs this year. UnitedHealth Group Inc. beat Wall Street expectations for third-quarter earnings and raised its outlook for the year, a sign that the health conglomerate has stabilized after a major meltdown. PayPal Holdings Inc. raised its full-year earnings guidance and announced a tie-up with OpenAI to embed its digital wallet into ChatGPT. Trump Media & Technology Group Corp. plans to make prediction contracts available on its Truth Social network, allowing users to bet on events ranging from political elections to inflation-rate changes, according to a statement on Tuesday. JetBlue Airways Corp. reported a smaller-than-expected loss in the third-quarter helped by lower fuel costs and improved revenue after the carrier discontinued money-losing routes. Eli Lilly & Co. has already produced billions of doses of its next-generation weight-loss pill, anticipating massive global demand ahead of a potential launch next year. D.R. Horton Inc. beat estimates for quarterly home orders as first-time buyers get a lift from falling mortgage rates. Skyworks Solutions Inc. has agreed to buy Qorvo Inc. in a cash and stock deal that values the company at about $10 billion and has the potential to bolster a key part of the US chips supply chain. NXP Semiconductors NV, a provider of chips for automakers and industrial customers, gave a stronger-than-anticipated forecast for the current period, signaling that the company is recovering from sluggish demand and trade war uncertainties. Wayfair Inc. reported net revenue for the third quarter that beat the average analyst estimate. Royal Caribbean Cruises Ltd.’s raised guidance fell short of Wall Street expectations. SoFi Technologies Inc. boosted its adjusted net revenue forecast for the full year. Confluent Inc., a software company, reported third-quarter results that beat expectations and raised its full-year forecast for adjusted earnings. BNP Paribas SA said the takeover of the Axa Investment Managers, completed at the start of July, will lead to combined revenue and cost benefits of around €550 million ($641 million) in four years’ time. Sherwin-Williams Co. reported third-quarter earnings that topped Wall Street expectations, as the paint maker’s cost control measures and pricing power help it navigate a choppy home improvement market. Adani Green Energy Ltd. said its second-quarter profit more than doubled, aided by growing power sales and a tax credit. Ping An Insurance (Group) Co. said profit rose 11.5% in the first nine months of this year, as a stock market rally lifted investment returns and policy sales expanded. Some of the main moves in markets:
Stocks
The S&P 500 was little changed as of 11 a.m. New York time The Nasdaq 100 rose 0.3% The Dow Jones Industrial Average rose 0.5% The Stoxx Europe 600 fell 0.2% The MSCI World Index was little changed Bloomberg Magnificent 7 Total Return Index rose 0.6% The Russell 2000 Index fell 0.2% Currencies
The Bloomberg Dollar Spot Index fell 0.1% The euro rose 0.1% to $1.1661 The British pound fell 0.4% to $1.3277 The Japanese yen rose 0.6% to 151.98 per dollar Cryptocurrencies
Bitcoin rose 0.5% to $115,079.33 Ether fell 0.3% to $4,118.16 Bonds
The yield on 10-year Treasuries was little changed at 3.98% Germany’s 10-year yield was little changed at 2.62% Britain’s 10-year yield declined one basis point to 4.39% The yield on 2-year Treasuries was little changed at 3.49% The yield on 30-year Treasuries was little changed at 4.55% Commodities
West Texas Intermediate crude fell 2% to $60.11 a barrel Spot gold fell 0.8% to $3,951.41 an ounce ©2025 Bloomberg L.P.
