--- title: "Can the AI Rally Continue, or Is It Starting to Fade? Mag 7 Earnings to Provide Clues Tonight" type: "News" locale: "en" url: "https://longbridge.com/en/news/284547644.md" description: "Consensus Estimates project that Alphabet, Microsoft, Amazon, and Meta Platforms will collectively reach $600 billion in capital expenditures by 2026. Goldman Sachs states plainly: if capital expenditures remain flat, it effectively constitutes a slowdown. With positioning at historical highs, better-than-expected results from a single company could boost sector sentiment, but misses by any one of them could trigger a chain reaction. The suspense lies in whether surprises will be shared or whether shocks will spread" datetime: "2026-04-29T10:34:22.000Z" locales: - [zh-CN](https://longbridge.com/zh-CN/news/284547644.md) - [en](https://longbridge.com/en/news/284547644.md) - [zh-HK](https://longbridge.com/zh-HK/news/284547644.md) --- # Can the AI Rally Continue, or Is It Starting to Fade? Mag 7 Earnings to Provide Clues Tonight How much longer can the AI-driven tech stock rally last? The answer may become clear tonight. On April 29, Alphabet, Microsoft, Amazon, and Meta Platforms will release their first-quarter earnings reports in succession, with Apple following suit on Thursday. These four companies collectively account for 18% of the S&P 500’s market capitalization, and their capital expenditure guidance is viewed as a key barometer of investment enthusiasm for AI computing power. Ahead of the earnings releases, market optimism regarding AI capital expenditures has already been tested. According to The Wall Street Journal, OpenAI missed its targets for both revenue and user growth, raising doubts about whether it can fulfill commitments to invest up to $1.5 trillion in computing power. This news put the brakes on enthusiasm for AI capital spending, putting pressure on U.S. tech stocks overnight, with the Nasdaq Technology Index falling more than 1.3%. Against this backdrop, Wall Street’s focus has moved beyond short-term income statements. **The core questions are: How long can the expansion in capital expenditures continue? And to what extent can revenue growth translate into profits?** ## After $600 Billion in Capital Expenditures: The AI Narrative Stands at a Crossroads Consensus Estimates project that **Amazon, Microsoft, Meta Platforms, and Alphabet will collectively reach $600 billion in capital expenditures by 2026, rising further to over $800 billion by 2027.** According to Goldman Sachs’ calculations, by then nearly all free cash flow of the "Magnificent Seven" tech giants will be consumed by capital expenditures, with companies like Meta Platforms potentially no longer generating positive cash flow. Rich Privorotsky, Head of Trading at Goldman Sachs, offered an ironic assessment: in an industry widely believed to face a shortage of computing supply, it is actually the demand side that is distorted. He termed this phenomenon "token maximization"—engineering teams compete to consume as much computing power as possible because underspending is seen as a career risk. **This distorted incentive mechanism has driven a significant amount of inefficient capital expenditure.** Privorotsky also pointed out a structural contradiction: semiconductor stocks are direct beneficiaries of growing capital expenditures and thus welcome continued spending increases. However, for shareholders of hyperscale cloud providers (Amazon, Microsoft, Google, Meta Platforms), the increase in capital expenditures over the past few quarters has not yielded market returns, as the return on AI investment remains difficult to quantify. "Last week we heard from suppliers, but the narrative from the hyperscale cloud providers, who are the spenders, is much vaguer." In his view, the real key question is not whether demand is strong, but whether capital expenditures can continue to rise. **“If capital expenditures stop growing, that poses a problem for the entire narrative. Against a backdrop of continuously rising input costs, flat capital expenditures essentially constitute a slowdown.”** ## With Crowded Positions, What to Watch in the Big Five’s Earnings? From a technical perspective, large-cap tech stocks have undergone rapid repricing in recent weeks. The RSI indicator for Goldman Sachs’ Mega Cap Tech Basket fell below the oversold line of 30 on March 30 and touched the overbought level of 74 by April 17, completing an extreme swing in just three weeks. **Position crowding has risen significantly after the rally**, with Goldman Sachs’ proprietary data showing the long-short ratio at the 88th percentile of its three-year historical range, a historically high level. Amid highly crowded positioning, Wall Street is closely watching signals from the tech giants’ earnings reports. JPMorgan trader Brian Heavey ranked them by position crowding from highest to lowest as: Amazon, Meta Platforms, Alphabet, Apple, and Microsoft. Goldman Sachs’ ranking differs, viewing Alphabet as the most crowded long position. Amazon (Most Crowded): JPMorgan rates it "Overweight" with a price target of $280. **Market attention focuses on whether capital expenditure guidance can support AI computing demand, and whether AWS revenue growth continues to benefit from the migration of AI workloads.** AWS growth was 24% last quarter, with annualized AI service revenue exceeding $15 billion; this threshold needs to be held tonight. If growth falls below 20%, it could become one of the turning points for sentiment throughout the earnings season. Meta Platforms (Second Most Crowded): JPMorgan rates it "Overweight" with a price target of $825. Goldman Sachs’ calculations show that **at the current capital expenditure trajectory, Meta Platforms will no longer generate positive cash flow. The market is focused on the pressure capital expenditures place on free cash flow, and the effectiveness of AI recommendation algorithms in boosting advertising revenue.** The $135 billion annual capital expenditure plan requires Zuckerberg to provide fresh explanations every quarter. Any phrasing such as "will continue to evaluate" is interpreted by the market as a loosening of commitment; in past quarters, any hesitation led to unfavorable after-hours reactions. Alphabet (Third Most Crowded, Viewed by Goldman Sachs as Most Crowded): JPMorgan rates it "Overweight" with a price target of $395. **The market is watching whether search advertising is impacted by AI chat tools, and the extent to which the cloud business benefits from AI computing demand.** Google Cloud is expected to grow by 49.6%, but Gemini’s commercialization has yet to provide clear financial figures. If Cloud revenue exceeds expectations but monetization signals remain vague, the market reaction could be cooler than anticipated. Apple (Fourth Most Crowded): Price target of $325. **The market is focused on its response to rising memory costs and the impact of leadership changes.** iPhone revenue in the second quarter of fiscal 2026 grew 27% year-over-year to $59.5 billion, with a gross margin of 48.5%; guidance for the third quarter projects iPhone sales of $50.1 billion with a gross margin of 47.6%. Investors are more concerned with gross margin resilience. Microsoft (Fifth Most Crowded, Least Crowded): JPMorgan rates it "Overweight" with a price target of $550. Privorotsky pointed out that **Microsoft is likely to provide guidance on capital expenditures for fiscal 2027, which will serve as an important reference for the market to assess medium-to-long-term investments by hyperscale cloud providers.** Additionally, the market is watching Azure cloud business growth and the contribution of AI services to revenue. Consensus estimates for Azure growth are around 38%, but what the market really wants to see is whether Copilot can contribute quantifiable revenue on the enterprise side. Second-quarter guidance below 36% would be a negative signal, while exceeding 40% would be a pleasant surprise. Another suspense point of the tech giants releasing earnings on the same day is: Will surprises be shared, or will shocks be contagious? The AI narrative stands at a crossroads, awaiting direction tonight. ### Related Stocks - [GOOGL.US](https://longbridge.com/en/quote/GOOGL.US.md) - [GOOG.US](https://longbridge.com/en/quote/GOOG.US.md) - [AMZN.US](https://longbridge.com/en/quote/AMZN.US.md) - [META.US](https://longbridge.com/en/quote/META.US.md) - [METW.US](https://longbridge.com/en/quote/METW.US.md) - [GGLL.US](https://longbridge.com/en/quote/GGLL.US.md) - [AMZW.US](https://longbridge.com/en/quote/AMZW.US.md) - [MSFL.US](https://longbridge.com/en/quote/MSFL.US.md) - [GOOW.US](https://longbridge.com/en/quote/GOOW.US.md) - [FBL.US](https://longbridge.com/en/quote/FBL.US.md) - [MSFU.US](https://longbridge.com/en/quote/MSFU.US.md) - [AMZU.US](https://longbridge.com/en/quote/AMZU.US.md) - [METU.US](https://longbridge.com/en/quote/METU.US.md) - [MSFT.US](https://longbridge.com/en/quote/MSFT.US.md) - [AAPL.US](https://longbridge.com/en/quote/AAPL.US.md) - [.SPX.US](https://longbridge.com/en/quote/.SPX.US.md) - [OpenAI.NA](https://longbridge.com/en/quote/OpenAI.NA.md) - [GS.US](https://longbridge.com/en/quote/GS.US.md) - [JPM.US](https://longbridge.com/en/quote/JPM.US.md) - [W4VR.SG](https://longbridge.com/en/quote/W4VR.SG.md) - [JPM-M.US](https://longbridge.com/en/quote/JPM-M.US.md) - [JPM-C.US](https://longbridge.com/en/quote/JPM-C.US.md) - [JPM-D.US](https://longbridge.com/en/quote/JPM-D.US.md) - [JPM-L.US](https://longbridge.com/en/quote/JPM-L.US.md) - [8634.JP](https://longbridge.com/en/quote/8634.JP.md) - [JPM-K.US](https://longbridge.com/en/quote/JPM-K.US.md) - [JPM-J.US](https://longbridge.com/en/quote/JPM-J.US.md) ## Related News & Research - [Meta will now allow parents to see the topics their child discussed with Meta AI](https://longbridge.com/en/news/283816465.md) - [Meta is tracking employee keystrokes on Google, LinkedIn, Wikipedia as part of AI training initiative](https://longbridge.com/en/news/283739838.md) - [Meta Platforms Will Close 6,000 Open Positions in Addition to Major Layoffs as META Stock Investors Worry That AI Spend Is Just Too Much](https://longbridge.com/en/news/284083681.md) - [Anthropic Commits $100B to AWS as Amazon Bets Up to $25B on AI Partner. 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