Spending on AI has fuelled the three-year bull market, but mounting questions about when the companies will see returns on those investments threatens to dampen the enthusiasm. This week “could determine whether the rally continues, or if it takes a pause,” said Talley Leger, chief market strategist at the Wealth Consulting Group, which has $5 billion in assets under management. So far earnings season is off to a strong start. Results from more than a quarter of the companies in the S&P 500 are in and about 85% of those firms have topped Wall Street estimates, the best showing in four years, according to data compiled by Bloomberg Intelligence.
That performance has helped soothe concerns about a flare up in US-China trade tensions and credit risks in the banking system.
And it is fuelling a rebound in the S&P 500 that’s pushing the benchmark back to record highs after a selloff earlier in October sparked the gauge’s worst week in nearly five months. The so-called Magnificent Seven, which includes the five companies reporting as well as Nvidia Corp. and Tesla, accounts for nearly half of the S&P 500’s 15% advance this year.
To sustain the gains, however, investors are looking for assurances from the tech giants that the flow of tens of billions of dollars for computing infrastructure will continue – and ultimately pay off down the road.
