Big Tech Earnings Bonanza, October’s Grand Finale, And Don’t Forget Jerome
The coming week is shaping up to be a blockbuster for markets – a perfect storm of mega-cap tech earnings and a Federal Reserve cameo. In true Our Trade Desk style, let’s cut through the noise (and media fear-mongering)
Earnings on Deck: The Big Spenders Step Up
Five of the “Magnificent Seven” tech giants are set to report earnings this week, and each is likely to flex its muscles on AI and big spending (guidance schmidance – the market cares more about what they did and plan to do next). Here are the key reports and dates:
- Microsoft (Wed, Oct 29) – The world’s second-most valuable company reports Wednesday, fresh off unveiling a new $40 billion AI cloud partnership (featuring Nvidia). Expect CEO Satya Nadella to drop the term “AI” every other sentence. Wall Street will zero in on Azure growth and just how many billions Microsoft is pouring into AI infrastructure (hint: it’s on track to exceed $100B in the next year on data centers). Who cares about formal EPS guidance when Microsoft’s capital spending to dominate AI is the real show?
- Alphabet/Google (Wed, Oct 29) – Reporting the same day, Alphabet will likely tout its own AI moves – including a potential big investment in startup Anthropic – to prove Google hasn’t lost a step in the AI race. Search and cloud results are important, but investors are really watching how much cash Google is burning on AI ambition (they plan to spend $85B on AI-heavy data centers in the coming year that’s the big story). Google’s “Don’t be evil” motto now includes “Don’t be cheap on AI.” Expect analysts to ask about capital expenditures and AI-driven projects rather than nitpicking this quarter’s ad revenue wiggles.
- Meta Platforms (Wed, Oct 29) – Mark Zuckerberg reports Wednesday as well, likely bragging about those new AI-powered Ray Ban smart glasses he’s so proud of. More importantly, Meta’s spending will be in focus – the company’s year-to-date capital expenditures have doubled from last year (over $30B so far) as it builds out AI data centers. In fact, Meta expects to shell out up to $72B on infrastructure in 2025 to fuel its AI (and yes, metaverse) dreams. The real question is whether Zuck will dial back the spending or keep the money furnace blasting. (Given his bonus checks and long-term vision, my bet is on the latter)
- Apple (Thu, Oct 30) – On Thursday, Apple takes the stage. They’ve been late to the AI party, but CEO Tim Cook now insists Apple is ready to open its wallet to catch up in AI. After years of fiscal frugality, Apple is suddenly talking about building more data centers and even hinting at acquiring a “larger player” in AI – a startling U-turn for a company that once wouldn’t cough up $3 billion except for headphones.
- Why the change of heart? Probably because rivals like Microsoft and Google are spending tens of billions and have popular AI chatbots, while Apple has… well, Siri (no offense, Siri). Apple’s results will also highlight the iPhone factor – the newly launched iPhone 17 is selling like hotcakes, pushing Apple’s stock to record highsi. Strong holiday iPhone sales are expected, so Apple might ride that wave while promising to “embed AI across all our devices” in 2024. Just don’t expect concrete AI revenue guidance –It’s more about Apple convincing us it won’t sleep through the next tech revolution.
- Amazon (Thu, Oct 30) – Also reporting Thursday, Amazon will round out Big Tech week. The focus is on AWS (Amazon Web Services) and its capital spending. Recent AWS outages have investors eager for explanations, but the bigger story is Amazon’s own AI investments. The company plans to plow a staggering $100B into capex next year (mainly for AWS data centers), essentially saying “we’ll see your AI budget, Microsoft and Google, and raise you.” For Amazon, cloud dominance and AI services go hand in hand. The market will be watching AWS growth rates and any comments from CEO Andy Jassy about generative AI offerings. Amazon’s official earnings guidance will be a sideshow.
Good Old Jerome
And lest we forget, amid this earnings circus the Federal Reserve meets on Wednesday too. The Fed is expected to deliver another interest-rate decision (everyone is expecting a rate cut). But honestly, good luck stealing the spotlight from Apple, Microsoft & Co. unless Powell pulls a real surprise U-turn. The show here is Jerome Powell’s press conference for any dour warnings (media will love that), but the real market drivers are sitting in Big Tech’s earnings call forward guidance,, AI spending and margins for the entire S&P 500 not the Fed’s meeting minutes
Magnificent Seven Doing The Heavy Lifting (Again)
If you’ve noticed the market grinding higher into the end of October, you can thank the Magnificent Seven – those same mega-cap tech titans – for doing the heavy lifting. I’ve predicted a strong October close led by these big guns, and here we are. The S&P 500’s October performance has been carried by a handful of stocks’ outsized gains and earnings beats, while many other names ride in the draft. In fact, the dominance is jaw-dropping: the Mag-7 recently hit a record high as a share of the S&P’s market cap, and their earnings growth so far outpaces the rest of the index that without them the S&P 500’s overall earnings would actually be shrinking this quarter. (Yes, you read that right – take out Apple, Microsoft, Google, Amazon, Meta, Tesla, and Nvidia, and the market’s earnings “growth” turns into a contraction. Heavy load, indeed.)
Profits and market movement have been disproportionately concentrated in these seven stocks. Through sheer size and momentum, they’ve propped up index returns. As a group, they’re expected to post +35.9% year-over-year earnings growth this quarter, versus a measly +2.2% for the S&P 500 overall – and -2.3% for the rest of the index excluding them. They’re also the ones investing aggressively in future growth (AI, cloud, you name it), which gives the investing crowd confidence that these earnings can keep climbing. The market’s “Generals” are marching forward and dragging everything with them.
October tends to surprise to the upside (read on and see why) when the big players show up. The media might not admit it,(they are in the business of selling fear) but breadth doesn’t matter so much when your biggest constituents are knocking it out of the park. (Of
course, the narrow leadership will matter eventually – but that’s a story for another day. For now, I’m riding the wave.)
Year End Bonus-Time at Institutions: Watch The Year-End Scramble
Bet you didn’t know this open secret: Many institutional investors’ year ends on October 31, and their bonuses often hinge on year-end performance. Translation? This week isn’t just about earnings, it’s also about portfolio beauty pageants and “window dressing” as the clock ticks down. As one market strategist quipped, the end of a quarter brings “artificial forces” where managers bid up their winners to look good on client statements. Now imagine that phenomenon on steroids for annual bonuses.
It sounds cynical, but it’s reality: if you’re a big money manager whose bonus is tied to S&P 500 performance, you have every incentive to buy, not sell, the market leaders right now. Selling your Apples, Amazon’s Google Microsofts etc.before Oct 31 would be like benching your star quarterback right before the championship – not gonna happen. I expect them to pile into the hottest stocks ( Magnificent Seven) ” This classic window dressing pump can give an extra boost (and bonus) to already high-flying stocks. It’s one reason we often see inexplicable rallies in the biggest winners into their year-end – ironically (not surprising) followed by a cooling.
Is this behavior entirely rational or fair? Nope. Is it legal? Technically, outright marking up prices at the close to juice returns is illegal, but subtle portfolio rotation is hard to police. And let’s be honest – it happens. Academic studies have caught mutual funds showing suspicious outperformance on the last day of quarters and then lagging right after, consistent with a bit of “marking the close” for that performance boost. Why do they do it? Compensation is on the line – fund managers get paid for those year-end numbers. So where do you think the path of least resistance will be this week?