Big Tech Gears Up for AI Earnings Season Impact

As the S&P 500 seeks recovery from a slow third quarter, the spotlight is on big tech companies gearing up for their earnings reports this season. Key indicators suggest that artificial intelligence (AI) monetization will play a significant role in guiding investor sentiment. Dominic Rizzo, a portfolio manager at Yahoo Finance, discussed with us how companies like Meta are showing potential for accelerated growth due to improved AI targeting strategies, which have boosted their projections markedly from mid-single digits to approximately 20% for Q4. With Nvidia at the forefront as a key technology supplier, discussions about the overall group of tech giants, now referred to as the 'Magnificent Seven,' reveal that while this collective is expected to grow earnings around 40% in 2024, other companies in the S&P 493 will lag with growth in low single digits. The potential for convergence in earnings estimates could signal a shifting market dynamic. As companies increasingly rely on AI as a sustaining innovation, many believe that only larger corporations can afford the substantial investments required for AI advancements, like developing large language models. However, questions remain whether these moves will yield profitable results, creating a sense of urgency as all players in the sector face unprecedented levels of competition. Rizzo hints that the next major application of AI might involve voice technology, reflecting a promising future but with various business risks in the immediate term.