AI Stocks Face Second-Quarter Earnings Test! Alphabet, Intel, Tesla Under Key Scrutiny

The U.S. second-quarter earnings season will fully ramp up next week, with heavyweight companies including Alphabet (GOOGL-US), Intel (INTC-US), Tesla (TSLA-US), and Texas Instruments (TXN-US) set to release their financial results. Notably, Alphabet's AI-related capital expenditure plans and the performance of chipmakers like Intel are expected to serve as key indicators of the AI industry's health.

In recent years, AI-related stocks have seen significant price gains, prompting investors to use this earnings season to verify whether these companies' fundamentals can justify their currently elevated market valuations.

However, analysts note that the core issue facing chip stocks is not deteriorating fundamentals, but rather that market growth expectations are already at a high level. As a result, the market is focused not just on whether companies deliver strong results, but whether their performance can exceed expectations and deliver positive surprises.

Recently, despite Samsung Electronics and TSMC (2330-TW) reporting better-than-expected results, their stock prices did not see significant gains, suggesting the market may have already priced in the AI and semiconductor recovery themes.

Alphabet's Capital Expenditure as a Key Indicator for the AI Industry

Alphabet is scheduled to release its second-quarter earnings on Wednesday (22nd). As the parent company of Google, Alphabet is not only one of the world's most valuable companies by market capitalization but also one of the largest tech giants investing heavily in cloud services and AI infrastructure.

In recent years, Alphabet has partnered with Microsoft (MSFT-US), Amazon (AMZN-US), and Meta (META-US) to continuously expand investments in data centers, AI servers, chips, and network equipment, driving increased demand across semiconductor, cooling, power systems, and data center supply chains.

Analysts point out that while the market will closely watch Alphabet's revenue and profit performance for the quarter, greater attention will be placed on management's updated outlook for future capital expenditures.

Market analysis suggests that if Alphabet signals a slowdown in AI infrastructure investment, it could trigger a market-wide reassessment of the AI supply chain's prospects. Conversely, if the company further increases its capital spending, it would indicate that major tech firms still have strong investment demand for AI computing power, providing support for related industries.

Alphabet's current market capitalization is approximately $4.2 trillion, making it a key heavyweight in U.S. equities. Its earnings results and capital expenditure outlook could influence the future direction of the Nasdaq and S&P 500 indices.

Chip Stocks' Rally Faces Earnings Test, High Expectations Pose Biggest Challenge

Intel and Texas Instruments will also report their latest earnings next week. Given that semiconductor stocks have risen sharply this year, the two companies' operational performance and financial guidance will be crucial in determining whether the chip rally can continue.

According to Reuters data, the Philadelphia Semiconductor Index hit a record high at the end of June but has since pulled back, falling over 20% from its peak by July 17, officially entering a technical bear market.

However, the index has still gained over 60% year-to-date.

On an individual stock basis, Intel's share price has risen over 160% this year, while Texas Instruments has gained about 60%. With stock prices already reflecting optimistic market expectations, investors are applying higher scrutiny to corporate earnings and future financial guidance.

Analysts believe Intel's upcoming quarterly report carries significant weight. After a strong rebound in its stock price this year, the market will closely examine the company's revenue performance, gross margin trends, data center business, personal computer (PC)-related operations, and the latest progress on its foundry strategy.

The core question for investors is whether Intel's recent stock price surge reflects genuine improvements in its fundamental operations, or is primarily driven by AI hype, U.S. efforts to build a domestic semiconductor supply chain, and policy tailwinds.

If Intel's financial guidance or future outlook falls short of market expectations, stock volatility could intensify further, especially given elevated valuations and concentrated trading activity. Conversely, if the company can signal more optimistic order demand, capacity expansion, and improved profitability, it could help restore market confidence in Intel's turnaround and recovery.

S&P 500 Earnings Poised for Strong Growth, Earnings Season Faces Critical Test

Beyond tech giants, over 80 S&P 500 component companies will report second-quarter earnings next week, including Tesla (TSLA-US), American Express (AXP-US), Philip Morris International (PM-US), and defense contractor Raytheon Technologies (RTX-US).

According to LSEG IBES data, the market expects S&P 500 companies to report overall year-on-year earnings growth of approximately 26% for Q2. This robust earnings outlook has been a key factor supporting the U.S. stock market's performance this year.

As of July 17, the S&P 500 Index has risen about 9% year-to-date, just around 2% below its all-time high reached in early June.

However, as both stock prices and earnings expectations have risen in tandem, investor scrutiny of corporate earnings has become stricter. Even if a company reports better-than-expected results, its stock price could still face downward pressure if future growth momentum, AI investment scale, or financial guidance fail to exceed market expectations.

ECB Likely to Pause Rate Hikes, Market Focuses on U.S. Economic Data

On the macroeconomic front, next week lacks major global events, but several U.S. economic indicators will be closely watched by investors, including the ADP employment report ("the little jobs report"), Purchasing Managers' Index (PMI), new home sales data, and weekly initial jobless claims.

With recent tensions in the Middle East pushing up international oil prices, the market will use U.S. PMI data to assess whether rising energy costs are beginning to impact business operations and whether the U.S. economy maintains its resilience.

Previously released U.S. June Consumer Price Index (CPI) and Producer Price Index (PPI) data both came in below market expectations, easing investor concerns about renewed inflation and reducing expectations for further Federal Reserve rate hikes.

Current interest rate futures markets suggest most traders expect the Fed to hold policy steady at its late-July meeting. The market now sees the next 25-basis-point rate hike more likely in December rather than the previously feared September.

In Europe, the European Central Bank (ECB) will announce its latest interest rate decision this Thursday, drawing global investor attention.

The market widely expects that after raising rates by 25 basis points in June, the ECB may choose to pause this time to assess policy effects and upcoming economic data.

Recent eurozone inflation data has cooled more than expected, and with ongoing uncertainty in the Middle East, most market participants believe the ECB may wait for more inflation and economic indicators before deciding whether to resume rate hikes in September.

Middle East Tensions Remain Top Uncertainty, Oil Prices Influence Central Bank Policies

However, rising energy prices remain one of the ECB's top concerns. If Middle East tensions continue to escalate, pushing international oil prices back toward previous highs, energy costs could reignite inflationary pressures in the eurozone, increasing the likelihood that the central bank maintains its tight monetary policy.

Recent tensions between the U.S. and Iran have triggered a rebound in crude oil markets. Investors worry that if the conflict expands further, it could raise concerns about global energy supply, push up oil prices, and hinder the disinflation process.

Most market participants currently believe the conflict will be short-lived, so global risk assets have not yet shown significant risk-off reactions.

However, if oil prices continue to rise rapidly, the impact would extend beyond corporate costs and earnings outlooks, potentially forcing major central banks like the Fed and ECB to extend their high-interest-rate policies, keeping global financial conditions tight.

Next Week's Key Events: Central Bank Decisions, Inflation Data, and PMI in Focus

Next week, global markets will focus on major economies' economic data and central bank policy moves. The ECB's rate decision, U.S. employment data, manufacturing PMI, and energy market developments will be key investor concerns.

Monday (20th): China's one-year loan prime rate as of July 20, Germany's June PPI month-on-month, Canada's June CPI month-on-month, U.S. June Conference Board Leading Indicators month-on-month, Tokyo Stock Exchange closed.

Tuesday (21st): UK June unemployment rate, Germany July ZEW Economic Sentiment Index, Eurozone July ZEW Economic Sentiment Index, U.S. week ending July 4 ADP employment change.

Wednesday (22nd): U.S. API crude oil inventory for the week ending July 17, UK