The adjustment in the US stock market cannot overshadow the brilliance of technology, as the market continues to focus on earnings reports

According to the Zhitong Finance APP, Wall Street has recently paid close attention to whether the earnings reports of large tech giants can meet high expectations. Overall, these companies have mostly lived up to expectations. Last Friday's market sell-off led to a weekly decline in U.S. stocks, partly due to Amazon's (AMZN.US) mixed performance released after the market closed on Thursday, combined with disappointing non-farm payroll data and concerns about the economic impact of President Trump's global tariff policies. However, for investors expecting tech companies to support their market dominance with performance, most companies' earnings reports still provided ample evidence.

Kevin Gordon, a senior investment strategist at Charles Schwab, pointed out: "The tech sector is exhibiting a 'Teflon' quality against declines, with solid fundamentals and revenue growth significantly exceeding expectations, while profit margins remain relatively healthy. Although not without flaws and valuations are nearing historical highs, we remain highly optimistic, especially regarding large-cap blue-chip tech stocks."

Last week, Alphabet (GOOGL.US), Google's parent company, kicked off the earnings season with strong sales growth driven by its artificial intelligence business. This week, Apple (AAPL.US) recorded its strongest revenue growth in over three years; Meta Platforms (META.US) saw its stock price soar to an all-time high due to better-than-expected earnings and the announcement of aggressive investments in the AI sector; Microsoft (MSFT.US) achieved a strong performance in its cloud business driven by AI demand, with its market value briefly surpassing $4 trillion, becoming the second company in history to reach that milestone, and its stock price has risen for 10 consecutive weeks, setting the longest winning streak since 2023.

Amazon, however, became an exception, with its performance outlook appearing somewhat lackluster due to slowing growth in its cloud computing division and significant investments in AI.

Valuation Pressure Emerges

The Nasdaq 100 index fell 2.2% last week, with the decline mainly concentrated on Friday; the Bloomberg "Seven Tech Giants" index, which includes the aforementioned companies and Tesla (TSLA.US), fell 1.5% for the week.

However, the Nasdaq 100 index has still risen over 30% since its low in early April, while the "Seven Tech Giants" index has increased by more than 40%. These gains have raised questions among Wall Street professionals about whether the tech stock rally has been overextended. Currently, the expected price-to-earnings ratio of the Nasdaq 100 index is close to 27 times, significantly higher than the 10-year average of 22 times.

Overall, the companies that have disclosed their earnings reports have not shown significant signs of fundamental deterioration, which is particularly crucial given the ongoing uncertainty surrounding trade policies and tariff impacts. Bloomberg data shows that 96% of companies in the S&P 500 technology sector exceeded profit expectations, and 93% met revenue targets; while the overall index had profit and revenue exceedance ratios of 82% and 68%, respectively.

Despite Wall Street's long-term positive outlook on large tech stocks, the earnings disclosed last week further reinforced their growth potential. Bloomberg Intelligence data indicates that the profit growth expectation for the "Seven Tech Giants" has been revised upward from 21.4% a month ago to 24.2%, and revenue growth expectations have been adjusted from 11.5% in early July to 13.4% Of course, this growth rate has slowed compared to last year, when this group saw a net profit growth of 36% and revenue growth of 14%. However, compared to the overall market, its growth advantage remains quite significant: the overall market's profit growth expectation for 2025 is 8.9%, and revenue growth expectation is 5.5%.

Michael Nell, a senior investment analyst and fund manager at UBS Asset Management, stated: "Given the previous growth rates and duration of these companies, the current slowdown is reasonable. We have not observed a significant deceleration that would raise concerns; it simply indicates that large enterprises cannot maintain high-speed growth indefinitely."

Focus on NVIDIA's Earnings Report

Currently, investors are closely monitoring NVIDIA's developments. This chip manufacturer, at the core of the artificial intelligence boom and the world's most valuable company, is set to release its earnings report on August 27. Its main competitor in the AI processor field, the relatively smaller AMD (AMD.US), will disclose its performance on Tuesday.

For these two chip companies, key positive signals are already clear: large tech companies have reiterated their commitment to continued investment in the AI sector. Meta, Microsoft, Alphabet, and Amazon have all raised their capital expenditure plans, and Bloomberg's supply chain data shows that these four companies contribute over 40% of NVIDIA's revenue, thus creating a series of positive supports.

Michael Nell from UBS Asset Management stated: "The application scenarios for AI are continuously materializing, and some companies have begun to reap actual returns, which means that investment in this field is no longer purely speculative. Of course, this does not mean that large tech stocks will not experience overvaluation or corrections, but the weight of the tech industry in the overall market is irreversibly increasing. This trend has run throughout my entire career, and there is currently no reason to believe it will stop."