Big Tech earnings test record stock market rally as AI spending takes center stage

Market watchers looking for clarity on the direction of Big Tech and the AI investment boom didn’t get much Wednesday afternoon amid a barrage of key earning reports.

Instead, four leading tech companies reported quarterly results that beat Wall Street’s official forecasts but nevertheless fell short of the sky-high expectations investors have set for companies leading the AI revolution.

Investors were most enthusiastic about the results of Google-parent Alphabet, which saw its shares climb as much as 6% in after-hours trading. The company reported earnings and revenues that beat analysts’ expectations and raised its estimate of how much it would spend on AI infrastructure.

Earnings for Facebook parent Meta were greeted with less fervor. Its shares fell more than 5% after the company said it expected revenue growth to stay flat in the second quarter.

Amazon’s and Microsoft’s results and forecasts were more mixed, though investors ultimately sent both lower by about 3%.

The reports come as the major U.S. stock indexes sit near all-time highs despite war with Iran, rising oil prices and dismal consumer sentiment readings.

But overall business investment and consumer spending levels remain resilient — and companies on the S&P 500, the index considered the best proxy for overall stock market performance, are reporting the highest average net profit margins in more than 15 years, according to analytics group FactSet.

That performance is being led by tech companies known as “The Magnificent 7” — Apple, Microsoft, Alphabet, Amazon, Meta, Nvidia and Tesla, which now dictate about one-third of the S&P 500’s average performance.

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Tech’s leadership has created a double-edged sword for the market writ large: When times are good in tech, the market tends to rise. When tech’s performance is rockier, the market can sink.

“Stocks are again trading at record highs, reflecting strong investor confidence, but the S&P 500’s heavy concentration in the Mag 7 technology leaders elevates downside risk should earnings fall short, as valuations leave little margin for error,” said Chris Brigati, chief investment officer at SWBC, a Texas-based financial group with more than $1 billion assets under management, in a note to clients this week.

Investors remain focused on the companies’ projections for future spending levels on the technology and infrastructure underlying their AI programs — and how that squares with revenues, Brigati said.

“Each company faces its own dynamics, but delivering tangible results from elevated [capital expenditures] remains the critical test,” Brigati said.

Until the end of March, Mag 7 companies’ performance had been caught in the downdraft that had hit the broader market as the war with Iran took hold. Many had already spent much of the second half of 2025 already treading water as concerns about the timeline for earnings from AI investments, plus seemingly circular financing arrangements, took hold.

But sometime in early April, investors began to realize that the most important names had been trading at a relative discount relative to projected earnings, according to Ed Yardeni, an economist and president of Yardeni Research, a widely respected market consultancy.

“I think the perception that there might be an exit ramp for Trump with the war with Iran and ceasefire got investors looking at markets again, and what they suddenly realized is, the overall market, and specifically the Mag 7, were a lot cheaper,” Yardeni told NBC News.

In recent days, the market has lost some momentum amid signals Trump is planning for a more prolonged conflict. A report from the Wall Street Journal that ChatGPT maker OpenAI may be on track to miss key revenue and users targets has also slowed tech’s recent momentum. OpenAI investments in — and from — other major tech companies have left it deeply intertwined in the AI boom, and some investors fear any weakness could ripple through parts of the AI ecosystem.

OpenAI called the Journal report “clickbait.”

The actual severity of any shortcomings at OpenAI, and how far any weaknesses could spread, remain an open question, Yardeni said. For now, cautious investor optimism remains the prevailing sentiment and will likely continue to power markets higher.

“Concerns about some of the uncertainties, like if these companies are spending too much, or if they’ll ever get a proper rate of return, that seems to have gone by the wayside,” he said.

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