US TRADE DEAL WITH CHINA
Earnings season is a crucial time in the financial calendar, and plays a major role as a catalyst that can influence investor sentiment and stock prices. It's when companies reveal their performance over the previous quarter, and provide expectations for the future. In recent years, technology and artificial intelligence (AI) stocks have led the charge. These companies have not only posted strong earnings but have also redefined entire industries and have helped to push stock prices to fresh highs.
- WHY EARNINGS MATTER (and why AI stocks dominate)
When tech and AI leaders report strong quarters, momentum builds quckly. When companies are successful this reflects powerful fundamentals, which might include demand for cloud services and semiconductors or increasing adoption of AI tools or software. These companies often deliver better-than-expected earnings and raise future guidance (projections for the future), boosting wider market sentiment. Over the recent quarter many eyes were on the so-called “Magnificent Seven” stocks—Apple, Microsoft, Alphabet, Amazon, Nvidia, Meta, and Tesla—due to their major influence on markets.
- MAJOR COMPANIES REPORT SOLID EARNINGS
In this reporting cycle, Nvidia, Microsoft, and Apple led the pack with earnings beats. Nvidia, remained a favourite even before its earnings release, with estimated earnings far above consensus. Nvidia remains the world’s most valuable public company, and its leadership in AI chips underpins the broader AI bull thesis. Microsoft continues to benefit from its Azure cloud and AI computing, while Apple impressed with strong services and device sales. Amazon, Alphabet, and Meta delivered more mixed results: some revenue beats counterbalanced somewhat offset by cautious forward guidance. Tesla posted strong earnings but raised eyebrows with lower delivery targets for next quarter. The remaining titan, NVIDIA, the most valuable company in the world is forecasted to post record breaking revenue and earnings results on August 27.
- EARNINGS BEATS: HOW THIS SEASON COMPARES
With some 474 companies from the S&P 500 index having declared earnings, 80% of companies outperformed earnings estimates this Q2 (LSEG). It’s a very strong performance, compared to the previous four quarter average of 76%. This strong beat rate shows market resilience and effective cost management, among less celebrated companies in the S&P 500 as well as highlighting the positive influence of AI linked stocks on market sentiment.
- POST-EARNINGS STOCK MOVES
The reaction of markets to these earnings has been noteworthy. Microsoft and Apple jumped 4–6% in after-hours trading, recording gains into the next day. Tesla rallied some 8%, recovering from recent volatility due to above expectations margins. Meta, despite a beat, weakened slightly as viewers focused on weaker advertising figures and cautious guidance. Overall, positive earnings has helped push broader indices—and AI stocks in particular—to fresh all-time highs.
- WHAT COULD CONTINUE TO DRIVE STOCKS?
Even after earnings season winds down, there are other supportive factors. Government policy developments e.g. Trump-era tax cuts and cutting of regulations—are boosting optimism. Easing global trade tensions, between the U.S. and EU and US and China, reduce downside risk. Additionally, economic indicators in the U.S., including consumer spending and job gains, provide a positive backdrop for earnings and risk appetite. Equally important are potential interest rate cuts, of which at least 2 are expected this year.
Conclusion
As earnings season draws to a close, it’s clear that the AI-focused players—again drove results and investor sentiment. A higher-than-average percentage of companies beat earnings; Nvidia continues to be the star performer, while Microsoft and Apple are rounding out the winners. Stock prices have responded, with a number of AI-linked stocks climbing to all-time highs. With market sentiment underpinned by favorable policy and economic data, the stage might be set for continued upside. Geopolitical stability (trade deals, less conflict) and strong consumer fundamentals, could extend the rally into the next quarter and beyond.