AI Investment Drives S&P 500 as Tech Giants Set to Report Earnings

As the earnings season unfolds, investors keenly observe AI investment returns among S&P 500 companies. While profit growth is predicted to slow, technology and communication sectors show promising year-on-year increases. Key players like Meta, Microsoft, and Google navigate the AI monetization landscape amid record-high S&P 500 levels.

Investors are watching closely to see if investments in artificial intelligence are starting to yield returns for S&P 500 companies as the earnings season unfolds. Analysts predict a slowdown in profit growth from the previous quarter, with S&P 500 earnings estimated to have risen 5.3% compared to the past year, down from a 13.2% gain in the previous quarter. However, the technology and communication services sectors are expected to exhibit the most robust year-over-year growth, according to LSEG data.

The earnings period unofficially commences this week, with significant financial firms like JPMorgan Chase and Wells Fargo set to report on Friday. AI-centric companies have led earnings since the previous year, driving strong performance in the market. The S&P 500 currently sits at record highs, up approximately 21% for the year, with tech and communications dominating sector gains since the start of the year.

As investors seek justification for higher stock prices, the S&P 500 is trading at 22.3 times future 12-month earnings estimates, significantly above its long-term average of 15.7, reports LSEG Datastream. Solita Marcelli, chief investment officer for the Americas at UBS Global Wealth Management, highlighted potential gains in tech fundamentals and AI. Marcelli expects the semiconductor sector and AI megacaps to outperform for the quarter and upwardly revise their forecasts.

(With inputs from agencies.)