U.S. megacap earnings test market's tech trade and profit optimism

Earnings from major U.S. megacap firms, including Microsoft, Meta, Apple and Tesla, arrive this week and the group is expected to post about a 21.5% rise in quarterly earnings; investors will watch for evidence that AI investments are translating into revenue gains.

Earnings reports from U.S. megacap companies are due this week and are drawing close attention. The topic matters because these firms have large influence on overall U.S. profits and major stock indexes. Investors are looking for signs that heavy spending on artificial intelligence is producing tangible returns. The technology sector has cooled in recent weeks after being a primary engine of the multi-year bull market. Key facts: - The article mentions Microsoft, Meta, Tesla (reporting Wednesday after the market close) and Apple (reporting Thursday). - LSEG data show the megacap group is expected to post about a 21.5% rise in quarterly earnings versus a 5.3% gain for the rest of the S&P 500. - The tech sector represents roughly one-third of the S&P 500's weight, and the Magnificent Seven make up about one-third of the index. - Tech has been the worst-performing S&P 500 sector since the end of October, while the broader index is up about 2% year-to-date. - Analysts say investors want to see visible monetization or earnings from AI-related capital spending, especially by large cloud and platform providers. Summary: If megacap results show clear profit gains tied to AI, they could support broader market gains; if they disappoint, the large index weight of these firms may limit market upside. The next scheduled steps are the earnings reports due Wednesday (Microsoft, Meta, Tesla after the close) and Thursday (Apple). Further market reaction is undetermined at this time.