As AI rally wobbles, US stock market's spotlight turns to earnings

The US stock market has shifted its focus to earnings as the AI rally encounters challenges. Wall Street investors are closely watching quarterly results from key players, particularly Meta Platforms. AI-linked stocks, which were once a major driving force behind the bull market, have declined in recent days, leading to sharp losses in semiconductor and tech hardware companies.

Meta, a major player in building AI data centers, is set to report its earnings alongside semiconductor firms Lam Research and Texas Instruments. The uncertainty surrounding the AI sector's profitability and the high costs of capital investments have raised concerns among investors. Despite the recent setbacks, the S&P 500 has only declined by about 1% from its record high this month.

Other sectors have stepped up to compensate for the lagging tech stocks. As the US reporting season intensifies, investors are eagerly awaiting robust earnings performance from various companies. Meta, with a market capitalization of approximately $1.9tn, is the first to provide insights into the profitability of AI investments.

Chip companies have also benefited from the capital spending boom but have experienced a decline in stock prices. Investors will closely monitor reports from Lam Research and Texas Instruments to gauge the demand in the semiconductor industry. Additionally, the impact of rising Treasury yields and potential Federal Reserve rate hikes will continue to influence investor sentiment.