The corporate earnings season continues - investors' attention is on tech giants

This week, one of the key events for the US stock market will be the release of corporate financial reports. Results will be presented by roughly a third of the companies included in the S&P 500 index, giving investors a better opportunity to assess the state of American business.

So far, about a quarter of the companies in the index have published their quarterly results. According to analysts at Vital Knowledge, the reports look fairly encouraging at this stage, driven by sustained consumer demand, cost control, and price increases.

However, companies' financial resilience will face a major test in the coming days, when tech giants — Microsoft, Alphabet and Amazon — release their results. All three companies are planning large-scale investments in AI infrastructure development, including data centers and specialized chips.

Building the infrastructure needed for AI development is intensifying competition among tech companies. At the same time, investors are paying increasingly close attention to the cost of financing these investments and their potential returns. Concerns have recently intensified amid growing debt taken on to fund AI projects and rising borrowing costs, against which backdrop tech stocks fell sharply last week.

According to James Reilly, senior market economist at Capital Economics, despite the recent decline in tech stocks, most S&P 500 companies have held up relatively well under the pressure. This was also helped by a decline in US Treasury bond yields, which typically has a positive effect on stock valuations.

However, Reilly warns investors that if concerns about AI intensify further, both tech and other sector stocks could fall simultaneously, while Treasury bond yields could rise.

Accordingly, the reports from Microsoft, Alphabet and Amazon will concern more than just these companies' financial results. Investors will be watching particularly closely to see how well the massive spending on AI is paying off and how these investments are reflected in the companies' revenues and future growth prospects.