Can big tech afford to disappoint?
QQQ•With AI-driven expectations and valuations high, upcoming Big Tech earnings and guidance could test investor confidence. BCA Research says disappointing results or softer guidance could prompt a swift correction, pulling the S&P 500 toward 7,000 or lower from levels near 8,000 in recent months.
1. Expectations run high
AI enthusiasm has helped push US stocks to record highs, while trailing 12-month US earnings growth has reached about 30%. Investors are betting on a similar pace ahead, leaving little room for Big Tech to disappoint, said Jonathan LaBerge, chief strategist at BCA Research.
2. Earnings face scrutiny
Meta surrendered post-earnings gains on Thursday as investors weighed AI-driven growth opportunities against the rising cost of its AI expansion. Alphabet, Microsoft, Amazon, AMD and Nvidia are also preparing to report, with investors focused on whether capital spending and data-center costs can translate into years of earnings growth.
3. Guidance is key
BCA said the AI trade could continue to support stocks if third-quarter technology earnings broadly meet or exceed expectations and executives give optimistic guidance for 2027. LaBerge warned that disappointing results or softer guidance could unsettle investors and spark a swift correction, with the S&P 500 potentially falling toward 7,000 or lower.
