The US stock market welcomes the "critical 48 hours"! The AI investment feast faces the "submission" moment, can tech stock earnings continue to sustain the bull market?

According to Zhitong Finance APP, the market performance over the next crucial two days is likely to determine the trajectory of the U.S. stock market for the remainder of the year. On Wednesday and Thursday, five companies that account for about a quarter of the S&P 500 index—Microsoft (MSFT.US), Alphabet (GOOGL.US), Meta (META.US), Amazon (AMZN.US), and Apple (AAPL.US)—will release their earnings reports. In addition to providing insights into the business conditions of these companies (covering areas from cloud computing and e-commerce to electronic devices and digital advertising), investors will also focus on their outlook for the development of artificial intelligence.

Investment in artificial intelligence technology has driven this bull market in U.S. stocks over the past three years, but many questions about when these companies will start to see returns from these investments could potentially dampen investor enthusiasm.

Talley Leger, Chief Market Strategist at Wealth Consulting Group, stated, "The situation this week will determine whether this rebound continues or pauses." The group manages $5 billion in assets.

So far, the earnings season has started strong. More than a quarter of the companies in the S&P 500 index have reported their results, with about 85% of them exceeding Wall Street expectations, marking the best performance in four years. Data shows that this situation indicates a positive trend.

This performance helps alleviate concerns about the U.S.-China trade situation and the credit risks in the U.S. banking system. At the same time, it has driven a rebound in the S&P 500 index, bringing it back to historical highs. A previous round of selling in early October triggered the worst week for the index in nearly five months, while this rebound has brought the index close to historical high levels. The so-called "seven giants" (including the five companies reporting this week, as well as NVIDIA (NVDA.US) and Tesla (TSLA.US)) account for nearly half of the S&P 500 index's gains this year.

However, to maintain this momentum, investors are looking for commitments from tech giants that the flow of billions of dollars for building computing infrastructure will continue and eventually yield returns in the future.

According to data, Microsoft, Alphabet, Amazon, and Meta are expected to invest a total of $360 billion in capital expenditures in the current fiscal year, a significant portion of which will be allocated to artificial intelligence. Analysts predict that this expenditure will jump to nearly $420 billion next year.

The investments by large tech companies in artificial intelligence have led to stock price increases across various industries this year, covering sectors from semiconductor manufacturers and internet companies to utility companies. NVIDIA, the world's most valuable company and one of the biggest beneficiaries of this investment, will announce its earnings report on November 19 Positive Signals

So far, the revenue growth from services related to artificial intelligence has been most pronounced in the cloud computing businesses of Amazon, Microsoft, and Alphabet, which have become the focal point of earnings reports. Meta has also stated that its investments in artificial intelligence are improving advertising placements and user engagement in its social media business.

However, these companies' expenditures far exceed the revenues they are generating from artificial intelligence technologies. Nevertheless, investors have shown a certain level of trust in them, helping to boost the stock prices of large tech companies this year, as they believe these expenditures will enable these companies to dominate in a landscape where technology is widely applied and new artificial intelligence application scenarios continue to emerge.

David Lefkowitz, head of U.S. equities at UBS Global Wealth Management (which manages over $450 billion in assets), stated, "As long as we don't see any signs of cracks in the artificial intelligence capital expenditure story or the profitability outlook for artificial intelligence, I think that's enough to support a bullish trend."

However, the massive capital expenditures could potentially erode one of the sector's most valuable traits: exceptional profit growth capability.

Data shows that the profit growth rate for the seven major tech giants is expected to be 14% in the third quarter, down from 27% in the second quarter. Although this growth rate is nearly double the overall expected profit growth of 8% for the S&P 500 index, it is also the slowest growth rate for the sector since the first quarter of 2023.

However, large tech companies have a history of exceeding Wall Street expectations. Many investors are investing based on this expectation, as according to Leger, these earnings that exceed expectations are the "greatest support force" for the stock market. Leger stated, "This indicates that there is still a lot of room for improvement in people's expectations. This is a good sign for this season."