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

The AI rally, which marked its fourth anniversary, is experiencing a wobble that has shifted investor focus to earnings. Wall Street is now paying close attention to quarterly results from key players such as Meta Platforms, Lam Research, Texas Instruments, SpaceX, and Tesla. AI-linked stocks have struggled in recent days, with semiconductor companies and tech hardware firms like Dell Technologies witnessing sharp declines.

Meta, a major player in AI data center construction, is set to report, along with other hyperscalers, semiconductor firms, and Elon Musk-led companies. Investors are wary of the financing risks associated with the AI build-out boom, which has benefited a wide range of companies and stimulated economic growth. CoreWeave, an AI cloud company, saw its shares tumble due to concerns about its debt levels.

Recent caution also manifested in Deutsche Bank and RBC Capital Markets pulling back on their recommendations for the tech sector. The S&P 500 posted its largest weekly drop since June, though it remains about 2% below its record high. Other sectors, including healthcare and consumer staples, managed solid gains. Analysts note that this market is a "on-off switch" type, with AI dominating investor attention.

Companies like Meta are expected to provide crucial insights into profitability on their capex investments, which could bolster confidence in the spending's sustainability.