Last week's damage was significant: the S&P 500 lost 1.6%, the Nasdaq Composite dropped 2.9%, and the Dow gave back 0.9%. Semiconductors were the epicenter of the selling, but JPMorgan strategists argued the correction looked more like capital reallocation and valuation digestion than a deterioration in AI fundamentals. The bank noted that earnings expectations for chip companies continue to improve even as stock prices have diverged lower.
That earnings picture now takes center stage. Seventy-seven S&P 500 companies report this week, with Alphabet, Tesla, IBM, and Intel all due within 72 hours. LSEG data shows analysts expect 26% year-on-year S&P 500 earnings growth for the second quarter, up from 23.7% previously. Semiconductors are forecast to drive about 44% of that growth, with chip-sector profits seen jumping 133% from a year earlier.
The concentration of earnings power in a handful of chip names means the market's reaction function is unusually sensitive. Even strong profit growth can disappoint if it fails to clear a rapidly rising expectations bar. Taiwan Semiconductor Manufacturing slipped after reporting a 77% jump in net profit, and Samsung fell despite a 19-fold surge in operating profit. With Intel and Texas Instruments reporting this week, their guidance will be scrutinized for signs that AI infrastructure spending is flowing through to broader hardware demand.