US Stock Market: Preview of Q4-June Earnings Reports

■ Rising semiconductor prices may be interpreted by the market as a slowdown in the pace of AI infrastructure construction, thus putting pressure on stock prices.  
■ Earnings reports from major cloud service providers (Hyperscaler) will influence the overall market trend. 
 
With major US financial institutions releasing their earnings reports on the 14th, the earnings season for major US companies in the April-June quarter has officially begun. Driven by increased investment and financing related to artificial intelligence (AI) and expanded market revenue, major US financial institutions have delivered strong results, showing a good start to the earnings season. In addition to various financial institutions, the leading Dutch semiconductor equipment manufacturer and the leading Taiwanese wafer foundry will also release their earnings this week; the fourth week (20th-24th) will see earnings reports from technology, semiconductor, electric vehicle, and large investment companies; the fifth week (27th-31st) will see leading companies in the technology, semiconductor, smartphone, e-commerce, and logistics industries release their earnings. Of the seven large technology companies known as the "Magnificent Seven," six will complete their earnings releases by the end of July, marking the first peak of this earnings season. Following this, retail and major semiconductor companies will release their earnings reports. Until the last of the seven major semiconductor companies releases its earnings report on August 26th, the US stock market is expected to continue to focus on corporate earnings performance. 
 
According to statistics from financial information company LSEG I/B/E/S as of the 10th, the earnings per share (EPS) of S&P 500 companies in the April-June quarter are expected to increase by 23.7% year-on-year, a further upward revision from the 19.2% forecast in early April. From an industry perspective, the energy sector (32.8% → 117.4%) and the information technology (IT) sector (50.2% → 65.5%) saw the most significant upward revisions in earnings forecasts. In terms of contribution, the IT sector contributed 15.5 percentage points, and the energy sector contributed 4.7 percentage points, accounting for the vast majority, while the remaining nine sectors combined contributed only 3.5 percentage points. Soaring energy prices mainly drove the significant profit growth in the energy sector; therefore, the market will focus on the earnings reports and future performance outlook of the IT sector. Currently, the market has high expectations for the earnings growth of semiconductor companies, including those with AI-related businesses; it is worth watching whether their final performance can exceed market expectations. However, even if semiconductor companies deliver strong results due to rising chip prices, the market may still perceive high chip costs as a deterrent to investment in AI infrastructure, thus hindering stock price increases. Therefore, the biggest focus of this earnings season will be whether large cloud service providers (like Hyperscalers) continue their massive capital expenditures, and whether market concerns about the profitability of future capital expenditures and the potential deterioration of corporate finances can be alleviated. 
 
From a valuation perspective, the S&P 500's forward 12-month price-to-earnings ratio (PER) has remained around 20 since the end of March, with the IT sector fluctuating around 21, indicating that the market has moderately adjusted its expectations for AI-related earnings growth, and current overall valuations do not appear excessively high. Currently, the market has both high expectations and some concerns about the demand growth brought by AI infrastructure construction; therefore, stock prices are expected to remain volatile and limited in the short term during the adjustment process. However, in the medium term, overall corporate earnings will continue to grow steadily, and US stocks are expected to continue their upward trend at the pace of corporate earnings expansion. The S&P 500 is expected to reach a high of 8200 points this year, with a year-end target of 7700 points.