AI stocks lose momentum; earnings become Wall Street’s next big test
What Happened
AI-linked stocks have come under pressure after a powerful run, dragging the S&P 500 to its biggest weekly decline since June. Despite the pullback, the index remained roughly 2% below its record high set this month. Attention is now turning to quarterly earnings from Meta Platforms, Lam Research, Texas Instruments, Tesla and other major companies. Investors are particularly watching whether massive spending on AI infrastructure is translating into sufficiently strong profits. The Philadelphia SE Semiconductor Index has fallen about 12% this month, although it remains up 57% for 2026. Meanwhile, LSEG IBES estimates S&P 500 companies increased third-quarter earnings by more than 30%.
Key Takeaways
The AI story is shifting from excitement over investment to proof of returns. Goldman Sachs estimates five AI hyperscalers will lift combined capital spending to about $1.2 trillion next year, making upcoming earnings crucial for judging whether that spending is sustainable.