Wall Street Is Predicting a Turn in AI Capex
This past earnings cycle in tech land was a doozy. Among the five traditional Big Tech firms, the average stock price magnitude change in the trading day that followed earnings was 13 percentage points. For public giants measured in the trillions of dollars of market capitalization, that kind of share price movement is unusual. Such dramatic one-day moves only tell part of the story. Leading up to earnings, Apple shares had one of their strongest 30-day stretches in years. (Shares did sell off after the company reported messy guidance.) Microsoft shares are up 32% over the past month. Not to feel left out, Amazon shares are up 23% over the past two weeks.
Is it realistic to assume that three out of the five Big Tech firms reported quarterly earnings that were so good or bad as to cause their valuations to rise or fall by 25%, respectively? Anything is possible, although it’s not likely given how many analysts and firms follow the giants, analyzing their every move. We would need to see quite the shocker of an earnings release for Big Tech’s collective valuation to rise or fall by 25% overnight. Instead of shocks, 2Q26 earnings season in Big Tech land contained mild surprises here and there. Why then were 2Q26 earnings reactions so extreme?
Since the market is forward-looking, Wall Street is in the business of assessing when good times will turn sour and when bad times will turn positive.
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