Big Tech Firms Exhibit Divergent Earnings Trends Amidst AI Trade Developments

Tech Giants Post Strong Earnings, Investors Separate Winners and Losers in AI Trade

The world's biggest technology companies have posted strong earnings, showing that the artificial intelligence boom is alive and well. However, investors are getting more granular as they try to divvy up the winners and losers in the AI trade.

On one end is Alphabet Inc., whose strong growth at Google Cloud and in its other AI products sent the shares soaring 10% on Thursday, pushing their gain for the year to 23%. This makes Alphabet the biggest point contributor to the S&P 500 Index's rise in 2026. On the other end is Meta Platforms Inc., whose shares tumbled more than 8% on Thursday despite strong results as investors balked at Chief Executive Officer Mark Zuckerberg's assurances about the eventual payoffs from its rapidly rising capital expenses, which are increasingly being funded with debt.

The outcome was a $566 billion divergence on Thursday as Alphabet's market capitalization took off and Meta's sank a day after their earnings reports. The results suggest that investors are increasingly separating companies that can draw a line from spending to revenue growth and those that can't.

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The Magnificent Seven, a group of seven tech giants, are on pace to deliver earnings growth of 57% in the first quarter, more than three times the 18% estimate at the start of earnings season, according to data compiled by Bloomberg Intelligence. This growth is a key indicator of the health of the tech industry and the AI trade.

Apple Inc. and Amazon.com Inc. also offered encouragement to investors. Apple's shares climbed 3.3% on Friday, their biggest gain in months, after the company forecast revenue growth of as much as 17% in the current quarter, far exceeding Wall Street estimates. Meanwhile, Amazon shares ended the week at a record high after posting the fastest quarterly sales growth in its cloud business in more than three years.

Big Tech's results gave a substantial boost to the S&P 500 and Nasdaq 100, which ended last week at fresh records despite oil prices settling above $100 a barrel and data showing inflation ticking higher. Since the S&P 500 bottomed in late March, tech giants have been the driving force behind the index's rebound. However, not all tech giants are performing well. Microsoft shares sank nearly 4% on Thursday after the company projected 2026 capital expenditures of $190 billion, which overshadowed its forecast for accelerating revenue in its Azure cloud computing business.

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The rising spending that investors are punishing Meta and Microsoft over is welcome news for suppliers like semiconductor and memory storage makers, which have become the hottest trades on Wall Street. The Philadelphia Stock Exchange Semiconductor Index closed at a fresh record on Friday, extending its gain in 2026 to 50%.