--- title: "Mag 7 Earnings Week Arrives: Can $600 Billion in CapEx Sustain the AI Narrative?" type: "News" locale: "en" url: "https://longbridge.com/en/news/284320842.md" description: "The core question for the market is not the strength of demand—which is clearly robust—but whether capital expenditure can increase further. If capex remains flat against a backdrop of rising input costs, this effectively equates to a slowdown, directly challenging the current AI market narrative" datetime: "2026-04-28T06:23:46.000Z" locales: - [zh-CN](https://longbridge.com/zh-CN/news/284320842.md) - [en](https://longbridge.com/en/news/284320842.md) - [zh-HK](https://longbridge.com/zh-HK/news/284320842.md) --- # Mag 7 Earnings Week Arrives: Can $600 Billion in CapEx Sustain the AI Narrative? One of the most densely packed earnings weeks in history has arrived as scheduled, with the AI capital expenditure narrative facing a critical stress test. On Wednesday, Alphabet, Microsoft, Amazon, and Meta will simultaneously report their first-quarter results, followed by Apple on Thursday. Current consensus expectations have already fully priced in the combined 2026 capital expenditures of these four companies, which are expected to exceed $600 billion. Rich Privorotsky, Head of Delta One at Goldman Sachs, pointed out that the core question for the market is not the strength of demand—which is clearly robust—but whether capital expenditure can increase further. If capex remains flat against a backdrop of rising input costs, this effectively equates to a slowdown, directly challenging the current AI market narrative. In this market structure dominated by the logic of AI capital expenditure, semiconductors have become the most direct beneficiaries, with the sector surging 42% year-to-date, far outpacing the roughly 2% gain for the Mag 7 as a whole; excluding NVIDIA, the Mag 7 has risen only about 0.2% year-to-date. However, Goldman Sachs also warned that upward surprises from AI spending are "almost the entire game," **with semiconductor valuations rising to a P/E ratio of 60 times, deteriorating risk-reward ratios, and technical conditions shifting from tailwinds to headwinds.** ## CapEx Expectations: Consensus Already Fully Priced In The current race for computing power in the tech industry is spawning what Goldman Sachs calls the "Token Maxing" effect: engineering teams at major companies are competing to consume as much computing resource as possible, creating a distorted incentive where "underspending equals career risk," driving firms to spend aggressively even if inefficiently. Leading tech stocks have committed to a combined AI capital expenditure of over $740 billion by 2026. Current consensus expectations have already incorporated into their models the combined 2026 capital expenditures of Amazon, Microsoft, Meta, and Alphabet, totaling over $600 billion. Meanwhile, constraints have spread across multiple links: shortages are reported in electricity, CPUs, GPUs, copper, and even engineering talent. Goldman Sachs stated that, regarding current fundamentals, it is indeed hard to argue: "Supply is constrained in multiple verticals, EPS growth is accelerating, and the market narrative (whether right or wrong) is that we are on the verge of the most important technological breakthrough in decades." However, the market is indefinitely extrapolating upside potential forward—more computing power, higher intelligence, until the eventual realization of Artificial General Intelligence (AGI)—and this week's earnings reports will provide important reference points for these expectations. ## Semiconductors: Rally Reaches Critical Zone The rally in the semiconductor sector has evolved into a self-reinforcing cycle: **expectations and prices drive each other, with the market moving from "fundamental support" to "self-fulfillment." The sector's P/E ratio has risen to 60 times, while panic-driven chasing continues to accumulate.** Goldman Sachs believes this is a zone where "convexity risks begin to emerge"—parabolic rises always have an end. Within the sector, the leading drivers have quietly shifted. CPUs and analog chips have become the main pullers, while GPUs, which typically lead the gains, are lagging relatively. Goldman Sachs judges that the current breakout "looks like an upward breakout, but trading characteristics resemble a short squeeze"—with positions, capital flows, and forced buying jointly driving the market to chase right-tail risks. In terms of earnings contribution, Micron Technology alone accounted for more than half of the recent total upward revisions to S&P 500 earnings per share, with its quarterly results and guidance far exceeding consensus expectations. Market expectations for the "infinite extension" of demand for AI memory chips have pushed consensus valuations nearly double. The breadth of earnings upgrades for the S&P 500 is narrowing, with consensus expectations for median companies showing almost no change; the extreme concentration of earnings momentum is an indisputable fact. ## Hyperscalers: Divergence in Shareholder Logic Semiconductor stocks and hyperscaler stocks are showing markedly different market reactions to the same wave of capital expenditure, with the misalignment of interests between the two types of investors coming to the surface. Rich Privorotsky stated bluntly that semiconductor stocks harbor strong enthusiasm for capex growth—after all, these expenditures flow directly into their pockets; but shareholders of hyperscalers have historically not seen returns from increased capital expenditure. "Last week we heard from the suppliers (semiconductor companies), and this week it's the turn of the spenders (hyperscalers) to take the stage, whose narrative is far more complex," Rich Privorotsky expressed. This divergence has been clearly reflected in this year's market performance: **the Mag 7 as a whole has risen only about 2%, nearly flat when excluding NVIDIA, forming a sharp contrast with the 42% gain in the semiconductor sector. Hyperscalers are bearing substantial capital investment in the AI era, but there remains considerable uncertainty in the market regarding when and how these investments will translate into shareholder returns.** ## Corporate Buybacks: Structural Demand Provides Bottom Support As market sentiment faces testing, stock buybacks by US companies are providing a structural buffer for the equity market. Authorized buyback scales have hit record highs, with quiet periods ending sequentially, and total corporate buyback demand this year is expected to exceed $1 trillion. This buying pressure is price-insensitive, representing pure structural demand—companies are repurchasing heavily at historical highs, continuously shrinking the float, and mechanically boosting earnings per share. For the currently high-running stock market, this is a passive supporting force that cannot be ignored. ## Market Landscape: Either in the AI Supply Chain or an Outsider Rich Privorotsky's judgment on overall market risk-reward has turned cautious: "It is hard not to respect the strength of AI capital, but the speed of this rally is already extreme. Relative to expected upward surprises, they come almost entirely from AI spending—that is the entire game." Outside the main AI narrative thread, crude oil and refined product prices are consuming market attention, European stocks are lagging relatively, and market differentiation is becoming extreme. Goldman Sachs summarized: "You are either in the AI supply chain, or you are not participating in this rally. From current levels, risk-reward has deteriorated, and technical conditions are turning from tailwinds to headwinds." This concentration trend also extends to emerging markets: earnings growth driven by semiconductors is reshaping the entire structure of emerging markets, with EM becoming more concentrated rather than more diversified. For global investors, regardless of which market they are in, the distinction between being inside or outside the AI supply chain is increasingly becoming the most critical boundary determining returns. ### Related Stocks - [NVDA.US](https://longbridge.com/en/quote/NVDA.US.md) - [ARTY.US](https://longbridge.com/en/quote/ARTY.US.md) - [SOXL.US](https://longbridge.com/en/quote/SOXL.US.md) ## Related News & Research - [The Nasdaq Is on Fire. 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