The Tech Sector's Earnings Strength is a Bright Spot in a Murky Stock Market

Wall Street entered this week with high hopes for big-tech earnings, as these companies were expected to justify their leadership in driving the market’s strong performance. By and large, technology giants delivered results that reinforced investor confidence, even as the stock market ended the week on a sour note.

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Friday’s selloff, which weighed on the broader market, stemmed partly from Amazon’s mixed earnings results released late Thursday, along with a disappointing jobs report and heightened concerns about the economic toll of President Donald Trump’s extensive global tariffs. Despite this, tech companies largely showcased strong fundamentals that reassured investors of their dominant market position.

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“The sector is showing remarkable resilience,” said Kevin Gordon, senior investment strategist at Charles Schwab & Co. “Revenue growth has surpassed expectations, margins remain healthy, and while valuations are near historical ceilings, optimism remains strong, particularly among larger-cap names.”

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The earnings season began on a strong note last week when Alphabet Inc. reported impressive sales fueled by artificial intelligence initiatives. This momentum continued as Apple Inc. posted its fastest revenue growth in over three years, and Meta Platforms Inc. hit record highs after exceeding earnings expectations and outlining ambitious AI investment plans.

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Microsoft Corp. also benefited from soaring cloud demand linked to AI, briefly achieving a $4 trillion market cap—only the second company to ever reach that milestone. Its stock has now risen for 10 consecutive weeks, marking its longest winning streak since 2023.

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Amazon stood out as the lone laggard among the tech titans. The company offered a cautious outlook, citing slower growth in its cloud-computing business and substantial spending on AI infrastructure. Looking ahead, investor attention is shifting to Nvidia Corp., the semiconductor powerhouse at the center of the AI revolution, which is set to report results at the end of August.

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Despite Friday’s market dip, with the Nasdaq 100 Index down 2.2% and Bloomberg’s Magnificent Seven gauge slipping 1.5% for the week, both indexes remain significantly elevated. The Nasdaq 100 has rallied more than 30% from its April lows, while the Magnificent Seven Index has surged over 40%. This rapid ascent has prompted some market strategists to question whether tech valuations have become overheated. Currently, the Nasdaq 100 trades at nearly 27 times estimated earnings, well above its 10-year average of 22.

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Even so, fundamental strength remains robust across the sector. According to Bloomberg data, more than 96% of technology companies in the S&P 500 have surpassed profit expectations, and 93% have exceeded revenue forecasts. This compares favorably to the overall index, where 82% beat earnings estimates and 68% beat revenue projections.

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The outlook for tech earnings has improved notably in recent weeks. Bloomberg Intelligence data shows the Magnificent Seven are now projected to grow earnings by 24.2% this year, up from 21.4% just a month ago.

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Revenue growth estimates have similarly climbed to 13.4% from 11.5% in early July. Although this represents a slowdown from last year’s impressive 36% earnings growth and 14% revenue expansion, these firms continue to outpace the broader market, which is expected to see only 8.9% earnings growth and 5.5% revenue growth in 2025.

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“This moderation is natural given the extraordinary growth these companies have already achieved,” said Michael Nell, senior investment analyst and portfolio manager at UBS Asset Management. “We’re not seeing a severe slowdown that should alarm investors, but rather a recognition that these giants can’t sustain sky-high growth indefinitely.”

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Looking ahead, much attention is focused on Nvidia’s upcoming earnings release on August 27. The company, a critical player in AI chipmaking and the world’s largest by market capitalization, stands to benefit from rising capital expenditures on AI from tech leaders like Meta, Microsoft, Alphabet, and Amazon. Collectively, these four firms account for over 40% of Nvidia’s revenue, according to Bloomberg’s supply chain analysis. Advanced Micro Devices Inc., another AI chipmaker, is set to report earlier on Tuesday.

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Ultimately, this earnings season highlighted big tech’s ongoing commitment to AI investment and market expansion. “We’re past the point of AI being purely speculative,” Nell said. “Companies are already realizing tangible benefits. While tech stocks could occasionally get ahead of themselves and face pullbacks, the long-term trajectory is clear—technology will continue to claim a larger share of the market. That trend has defined my entire career, and I see no reason for it to reverse now.”

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