This week is expected to shake financial markets as major artificial intelligence (AI) companies in both Korea and the United States, which drive global stock markets, release earnings all at once. With shares of many AI-related stocks correcting this month amid concerns over overinvestment and profitability, Wall Street is likely to react sensitively to Big Tech earnings and capital expenditure (CAPEX) figures.
The fact that the Federal Reserve holds its Federal Open Market Committee (FOMC) regular meeting and decides the benchmark interest rate just before major Big Tech earnings is also cited as a significant factor in stock market volatility. With US inflation heating up again recently and hawkish (tight-money) officials within the Fed making a series of strong remarks, the market has been sharply raising the probability of a rate hike this month.
This week also brings the release of the US second-quarter gross domestic product (GDP) advance estimate and the June personal consumption expenditures (PCE) price index, which could stir movements in economically sensitive stocks. The war between the US and Iran, mired in uncertainty as neither negotiation nor all-out conflict proceeds, is still pointed to as a detonator that could push up international oil prices and inflation at any time.
Whether AI Big Tech firms including Microsoft, Meta, Amazon and Apple raise CAPEX is key... Samsung-SK hynix earnings also the 'eye of the storm'
This week, Wall Street is paying the closest attention to major Big Tech earnings, more densely clustered than ever. Specifically, on the 29th (local time), Microsoft (MS) and Meta, the parent company of Facebook, will release results for the fourth quarter of fiscal 2026 and the second quarter of fiscal 2026, respectively. On the 30th, Apple and Amazon will release results for the third quarter of fiscal 2026 and the second quarter of fiscal 2026, respectively. On the 29th, chip design firms (fabless) Qualcomm and ARM will also release results for the third quarter of fiscal 2026 and the first quarter of fiscal 2027. Although the quarterly basis differs by company, the earnings tally period is April to June this year for all of them.
Notably, three of the so-called five major hyperscalers (mega cloud operators) — Amazon, Microsoft, Meta, Oracle and Alphabet, the parent company of Google — will announce results this week. Investors are keeping a closer eye on whether these companies increase their AI investment and on their cash flows than on their existing business performance such as revenue and operating profit.
On this front, Alphabet, which opened the earnings season first among the five hyperscalers after market close on the 22nd, raised its annual capital expenditure guidance for this year another notch, from the previous $180 billion-$190 billion to $195 billion-$205 billion (about 288 trillion-303 trillion won), only to suffer a harsh stock-price backlash. While Alphabet said its second-quarter free cash flow (FCF) recorded a net outflow of $5.86 billion, it said its capital expenditure next year would be "significantly larger due to demand for data center construction and securing computing resources." This instilled in Wall Street the perception that hyperscalers could sink into a quagmire of debt if they fail to generate sufficient future AI-related profits.
Accordingly, Wall Street is also interested in whether Amazon, which ceded to Alphabet the status of the biggest capital expenditure spender this year, will revise its annual plan. Amazon had earlier presented its AI capital expenditure for this year at $200 billion on Feb. 5. Microsoft recently revised its capital expenditure plan upward from $185 billion to $190 billion, and Meta also raised its from the previous $115 billion-$135 billion to $125 billion-$145 billion. Oracle set its annual investment at around $50 billion. Wall Street judges that, given the recent surge in costs related to AI infrastructure such as memory semiconductors, hyperscalers other than Alphabet also have a considerable chance of revising their capital expenditure plans.
Earnings releases that could shake the New York stock market are not limited to the US market. Wall Street is also closely watching the second-quarter final results of SK hynix (000660) and Samsung Electronics (005930), released on the 29th and 30th, respectively. Korea's securities industry estimates that SK hynix's second-quarter operating profit exceeded 64 trillion won, thanks to expanded supply of high-bandwidth memory (HBM) amid a surge in AI demand. This surpasses the previous all-time high of the first quarter this year (37.6103 trillion won). This earnings release is expected to draw particularly high attention as a gauge of global AI demand and as the first business performance SK hynix will announce since listing American depositary receipts (ADRs) on the Nasdaq market on the 10th.
Samsung Electronics, which announced record-high preliminary results of 171 trillion won in revenue and 89.4 trillion won in operating profit on a consolidated basis on the 7th, will disclose final figures and detailed performance by business division on the 30th. Both Samsung Electronics and SK hynix are companies that will decisively influence the "semiconductor cycle peak theory" that has recently spread on Wall Street.
FOMC rate hike odds jump from 12% to 34% amid Middle East uncertainty... US Q2 GDP, June PCE also in focus
The Fed's FOMC regular meeting, scheduled for the 28th-29th, could send another signal to the market just before major Big Tech earnings. Wall Street broadly expects the Fed to hold the benchmark rate at the current 3.50-3.75% this month, but it does not rule out the possibility of a hike. The Fed has held FOMC meetings four times this year — in January, March, April and June — freezing the rate each time.
According to the Chicago Mercantile Exchange (CME) FedWatch Tool, the federal funds rate futures market sees a 65.8% probability that the Fed will freeze the rate at this month's FOMC meeting. This is 21.4 percentage points lower than the 87.2% a week earlier on the 17th. In contrast, the probability of a 0.25 percentage point rate hike jumped vertically from 12.8% to 34.2% over the same period. The probability that the Fed will freeze the rate throughout the second half of this year also fell from 21.1% to 7.2% over the period. Conversely, the probability of any rate hike at all soared from 78.9% to 92.8%.
Such changes are the result of a combination of factors, including instability in the Middle East situation, a renewed rise in international oil prices, and the spread of hawkish opinion within the Fed. As the US and Iran continued armed clashes over the Strait of Hormuz after the 7th of this month, the September-delivery Brent crude futures on London's ICE Futures Exchange and the September-delivery US West Texas Intermediate (WTI) futures on the New York Mercantile Exchange drew a rising curve for five consecutive trading days, surging to $100.69 and $92.19 per barrel, respectively, on the 23rd. Brent crude was at its highest since May 22 and WTI since June 4. As the market's trust in negotiations between the two countries collapsed, the effect of the ceasefire memorandum of understanding (MOU) that took effect on the 18th of last month has practically evaporated entirely. On the 24th, Brent crude and WTI fell more than 3% on news that Pakistan, at the request of China, whose crude oil supply chain has hit an emergency, is moving to revive negotiations between the US and Iran, but overall they still maintained high levels.
On the 15th, Fed Governor Lisa Cook pointed out at an event held in Washington, DC, that inflationary pressure has grown greater than the risk of a weakening labor market due to large-scale AI investment, supply shocks from tariffs, and the Middle East war. "If there is no sign of deflation, I am prepared to take action soon," Cook stressed. According to Reuters and Bloomberg, Dallas Federal Reserve Bank President Lorie Logan also argued in a speech at an event held in Houston, Texas, on the 16th that "if the inflation rate does not come down to 2% on its own, some degree of policy tightening will be needed to reach the target." Kansas City Fed President Jeff Schmid also explained at an economic forum held in Nebraska on the same day, "My main concern is inflation that is too hot," adding, "Since it has exceeded the target for too long, I am keeping policy focused on inflation."
The US second-quarter GDP growth rate, released on the 30th
