"People no longer look at them uncritically as they continue to raise forecasts by tens of billions every quarter. They also want to see profitability linked to it," says Maria Landeborn, senior strategist at Danske Bank.
Five of the so-called "magnificent seven" companies will release their quarterly reports on Wednesday and Thursday (after 10:00 PM Swedish time): Facebook owner Meta, Google owner Alphabet, Microsoft, Amazon and Apple.
"Right now there is a lot of focus on war and energy prices. At the same time, these companies still weigh heavily in the index and they have so far been insulated from the concerns that we have seen around industrial companies, for example," says Landeborn.
Massive investments
Every other day, new stock market records are broken in the US.
It is largely thanks to the big tech companies that we have had stock market records recently – again – despite war, energy prices and concerns about inflation and the economy.
Tech giants are making massive investments in data centers and other AI projects. For example, the combined capital expenditures of Microsoft, Alphabet, Amazon and Meta are expected to hit $649 billion this year, up from $411 billion last year, according to a Bloomberg report.
Quarter by quarter, forecasts for how much to invest in data centers have been raised. For much of last year, the more the forecasts were raised, the more it was seen as positive. Raised forecasts were basically the same as a price increase. That's not really the case anymore, says Maria Landeborn.
Now the focus is more on cost control and long-term planning.
That you can see there is sufficient profitability in the data center and AI operations so that, in the long term, you have a chance of recouping the investments you make.
Continued rally
Most indications are that this week's quarterly reports will lead to a continued stock market rally, according to Maria Landeborn.
At the same time, there is uncertainty - and at the beginning of the year, the size of the AI investments made the market tremble.
If there are disappointments, we could see bigger setbacks, given how much stock markets have risen and how high they are. But if you look at profit forecasts and expectations, everything points to a very strong reporting season.
Wednesday, April 29: Alphabet, Amazon, Meta, Microsoft
Thursday, April 30: Apple
Wednesday, May 20: Nvidia
Tesla, the seventh "magnificent" company, delivered a mixed report last week.
