U.S. technology stock earnings season kicks off, AI market interpretation may usher in new pattern
The earnings season for U.S. technology giants, which attracts the attention of the global capital market, officially kicked off in late July. As Google parent company Alphabet, Tesla and other leading companies have successively disclosed their second quarter 2026 results, the market's focus is shifting from the "input scale" of AI infrastructure to "output efficiency" - that is, whether the AI business can achieve substantial revenue growth and cash flow improvement. After experiencing previous sector shocks and consolidation, this financial reporting season is regarded by the industry as a key observation window for the AI industry to move from the “investment period” to the “realization period”.
The earnings season for U.S. technology giants, which attracts the attention of the global capital market, officially kicked off in late July. As Google parent company Alphabet, Tesla and other leading companies have successively disclosed their second quarter 2026 results, the market's focus is shifting from the "input scale" of AI infrastructure to "output efficiency" - that is, whether the AI business can achieve substantial revenue growth and cash flow improvement. After experiencing previous sector shocks and consolidation, this financial reporting season is regarded by the industry as a key observation window for the AI industry to move from the “investment period” to the “realization period”. The market's focus has been on three major dimensions: whether capital expenditure guidance is sustained, whether commercialization is accelerated, and whether the profit path is clear. These answers may directly determine the direction and structure of the technology stock market in the next stage. Market focus shifts to performance verification Alphabet's second-quarter revenue and earnings performance were both better than expected. During the earnings call, Google significantly raised its full-year capital expenditure forecast to $195 billion to $205 billion. Tesla’s second-quarter revenue was US$28.24 billion, a year-on-year increase of 26%, but adjusted earnings per share fell 18% year-on-year to US$0.33, well below the forecast of US$0.51. Financial reports from Microsoft, Meta, Amazon, Apple and other companies are expected to be released at the end of July. "The second-quarter earnings report of U.S. technology stocks is very critical. Currently, global attention is focused on the performance delivery capabilities of several major technology companies. Capital expenditure guidance and the latest statement on AI business are also very important." Di Xinghua, manager of Guofu Global Technology Internet Fund, said in an interview with a reporter from Shanghai Securities News. As the industry continues to increase computing power and deploy large models, market attention has already jumped out of the superficial question of "whether companies are deploying AI." According to Invesco Asia Pacific Global Market Strategist Zhao Yaoting, the focus of this financial reporting season is no longer whether companies are investing in AI, but whether AI is generating enough revenue and cash flow to justify these investments. Li Ziyang, manager of Morgan Stanley Innovation Fund, told reporters that during this financial reporting season, he will focus on the investment willingness and capital expenditure prospects of American cloud giant manufacturers in artificial intelligence in 2027, while closely tracking the research and development progress and commercialization of their internal large models. "If overseas technology giants can continue to maintain their competitiveness in the field of large models and smoothly promote the commercialization process, it will help support the continued growth of artificial intelligence-related capital expenditures." Li Ziyang said. The technology sector is expected to be severely torn apart On the eve of the start of this financial reporting season, the global technology market has already experienced violent fluctuations: since July as of July 22, the South Korea Composite Index, which has led the world during the year, has retraced nearly 20%; the Philadelphia Semiconductor Index, which has been soaring in the early period, has retraced nearly 13%; the stock prices of memory chip giants such as Hynix, Samsung Electronics, and Micron Technology have all fallen significantly from their previous highs. "Recently, the AI industry chain has experienced a round of deep emotional reshuffle, especially last week's continuous adjustment, and finally ushered in a decent rebound this week, but the expected tearing within the technology sector has become the core feature of the moment. From the market structure, the upstream chips and storage of computing power showed a V-shaped rebound; software and enterprise cloud sentiment are still weak. Funding risk preferences have changed, and transactions have shifted from unilateral long to swing gaming." Di Xinghua said. Di Xinghua judged that this adjustment was more due to technical and transaction structure factors, and there was no substantial deterioration in fundamentals. Specifically: First, the market concentration is too high, and a large amount of funds are piled on a small number of AI targets. Once there is a marginal change, it is easy to cause shocks; second, investors' trading behavior is highly convergent, forming a self-reinforcing negative feedback effect when falling; finally, some investors have used higher leverage on Korean technology stocks, amplifying price fluctuations. Mark Wilson, a partner at Goldman Sachs and head of EMEA hedge fund business, said that this round of selling is rare in history in terms of speed and depth, but its root causes are more from non-fundamental factors such as position congestion and leverage concentration, rather than a substantial deterioration in the economy or corporate profits.
Zhao Yaoting believes that the current fluctuations in the technology sector essentially reflect the market's shift from "AI narrative-driven" to "AI performance verification-driven". Investors no longer reward companies for increasing investment in AI. They want to see commercialization results, profit growth and return on capital investment. At the same time, higher U.S. bond yields and the over-concentration of market leadership are also amplifying two-way market fluctuations. How will the AI market be interpreted in the next stage? After excluding the short-term hype bubble, the long-term growth logic of the AI industry has not been shaken. Institutions generally believe that the AI infrastructure construction cycle is still continuing, and the market in the second half of the year may usher in a new pattern of structural differentiation and survival of the fittest. "I don't think there is currently a withdrawal of funds from the field of AI infrastructure. The AI cycle is still in the infrastructure construction stage, and storage already has a strategic position as important as computing power. However, in the next six months, the market's focus may shift from supply scarcity to execution. The ultimate winners will be those companies that can transform AI demand into sustained profitable growth, not just companies with exposure to the AI concept." Zhao Yaoting said. In Zhao Yaoting's view, this is not a rotation of funds from infrastructure to the software field, but more like the development of AI entering the next stage. Infrastructure construction continues, but investors have begun to turn their attention to companies that can turn AI into sustained revenue and quantifiable productivity improvements. Looking forward to the next few years, he believes that the biggest investment opportunities will occur in areas where AI is deeply embedded in enterprise workflows through intelligent agents, automation, industry-specific software and productivity platforms. The final winners are not necessarily the companies with the best models, but are more likely to be those with strong distribution capabilities and clear commercial and economic value propositions. Lu Xiaoyang, chief Chinese market analyst at FXTM, said that since 2026, the profits of the AI industry chain have begun to gradually concentrate on the upstream hardware side. "Looking ahead to the second half of the year, I think this trend is expected to continue, and U.S. technology stocks, including storage giants, may have even greater upside potential after a healthy correction." From a valuation perspective, Lu Xiaoyang believes that storage giants are still at a stage of relatively low price-to-earnings ratios, and the forecast price-to-earnings ratios of some leading companies in 2026 are only single digits. Against the background of high-bandwidth memory, long-term contract lock-in and short supply, most of these infrastructure providers have considerable and certain profit expectations. The combination of low valuation and high certainty of growth makes it expected to become the core target of the main capital allocation in the second half of this year.
Zhao Yaoting believes that the current fluctuations in the technology sector essentially reflect the market's shift from "AI narrative-driven" to "AI performance verification-driven". Investors no longer reward companies for increasing investment in AI. They want to see commercialization results, profit growth and return on capital investment. At the same time, higher U.S. bond yields and the over-concentration of market leadership are also amplifying two-way market fluctuations. How will the AI market be interpreted in the next stage? After excluding the short-term hype bubble, the long-term growth logic of the AI industry has not been shaken. Institutions generally believe that the AI infrastructure construction cycle is still continuing, and the market in the second half of the year may usher in a new pattern of structural differentiation and survival of the fittest. "I don't think there is currently a withdrawal of funds from the field of AI infrastructure. The AI cycle is still in the infrastructure construction stage, and storage already has a strategic position as important as computing power. However, in the next six months, the market's focus may shift from supply scarcity to execution. The ultimate winners will be those companies that can transform AI demand into sustained profitable growth, not just companies with exposure to the AI concept." Zhao Yaoting said. In Zhao Yaoting's view, this is not a rotation of funds from infrastructure to the software field, but more like the development of AI entering the next stage. Infrastructure construction continues, but investors have begun to turn their attention to companies that can turn AI into sustained revenue and quantifiable productivity improvements. Looking forward to the next few years, he believes that the biggest investment opportunities will occur in areas where AI is deeply embedded in enterprise workflows through intelligent agents, automation, industry-specific software and productivity platforms. The final winners are not necessarily the companies with the best models, but are more likely to be those with strong distribution capabilities and clear commercial and economic value propositions. Lu Xiaoyang, chief Chinese market analyst at FXTM, said that since 2026, the profits of the AI industry chain have begun to gradually concentrate on the upstream hardware side. "Looking ahead to the second half of the year, I think this trend is expected to continue, and U.S. technology stocks, including storage giants, may have even greater upside potential after a healthy correction." From a valuation perspective, Lu Xiaoyang believes that storage giants are still at a stage of relatively low price-to-earnings ratios, and the forecast price-to-earnings ratios of some leading companies in 2026 are only single digits. Against the background of high-bandwidth memory, long-term contract lock-in and short supply, most of these infrastructure providers have considerable and certain profit expectations. The combination of low valuation and high certainty of growth makes it expected to become the core target of the main capital allocation in the second half of this year.