Tech Imposes on Big US Earnings Week

Markets are shifting focus from geopolitics to earnings as a series of major names are expected to report this week, including several major tech firms and oil majors.

What Traders Are Looking For

• Several key tech majors will report earnings this week, offering insight into AI infrastructure demand and whether investors will continue to tolerate high inventories.
• Markets are shaking off modestly higher inflation pressures to focus on earnings.
• Major oil firms are expected to generate eye-popping earnings as US gasoline prices rise amid escalation in the Strait of Hormuz.

Markets Look to Justify Valuations

US equities had a rocky start to the week as fighting over the Strait of Hormuz intensified, sending oil prices higher and pushing the average US gasoline price over $4.00/gal. But heading into Tuesday, markets seem more hopeful that solid earnings will support stocks over the monetary policy pressures from higher inflation. After a strong run-up in June, tech stocks in particular are highly valued, and traders will want to see earnings keep pace with stock prices. Last week's declines in semiconductor stocks might signal that investors are adjusting their expectations ahead of earnings, with this week's major tech reports potentially setting the tone for the sector this season. Google parent Alphabet's earnings are likely to provide insight into AI development and cloud computing, while traders will try to gauge chip demand from Intel and Texas Instruments' earnings. The main theme is likely to be, once again, future-focused, with investors sensitive to whether demand in the second half of the year is holding up. The two largest oil companies, ExxonMobil and Chevron, will report earnings at the end of the week amid higher crude prices over the last quarter. Here's what traders will be looking at when these companies report this week:

Tesla Continues Rebound

The electric car maker will report earnings on Tuesday after the market closes, with the consensus for earnings rising to $0.54 per share from $0.40 in the same period last year. Revenue is expected to rise 17% to $26.4 billion following record deliveries as European sales rebounded. While traditional sales help provide a financial cushion for the company, the share price will likely respond more to news about progress on autonomous driving and AI infrastructure updates. 

Alphabet Spending in Focus

The search engine company will post earnings after the market closes on Wednesday, with analysts expecting its EPS to jump to $3.04 from $2.31 last year and revenue increasing 21% to $116.9 billion. The focus will likely be on cloud revenue and AI rollout capital expenditures. After the company made one of the largest share issuances in history to fund its expanding artificial intelligence infrastructure, investors will be looking for clues about when they might see a return on their investment.

AI Infrastructure Supporting Texas Instruments

The semiconductor manufacturer essential to the AI build-out is scheduled to report after Wednesday's close, with a consensus earnings estimate of $1.94, up from $1.41 last year. Revenue is expected to rise 17% to $5.2 billion. Traders will be scrutinising the company's earnings for insight into data centre demand and whether automotive demand has bottomed out, given a rebound in car sales. Stabilisation in demand would help support the company beyond AI and bolster its share price, even if the market is generally disappointed by tech performance.

Intel Still in "Show Me" Phase

The chipmaker will report its Q2 earnings after the market close on Thursday and is expected to remain in the black, with earnings of $0.22 compared to -$0.10 a year ago. Sales are projected to rise modestly (for a tech firm) by 12% to $14.5 billion. Traders will be looking for progress on its foundry and updates on demand for data centre CPUs. It would also be an opportunity for management to tout progress on the company's turnaround.

ExxonMobil Windfall Profits

The largest oil producer will report its earnings on Friday before the market opens, with investors expecting it to be a banger, as the average EPS projection is to more than double to $3.66 from $1.64 a year ago. Revenue is projected to rise 23% to $100.1 billion, as the bulk of the company's sales are tied to long-term supply contracts. However, premiums on its refining and upstream segments are expected to boost the bottom line. The market focus will be on what management intends to do with the windfall profits.

Chevron Leading the Pack

The US's second-largest oil producer will report earnings before the market opens on Friday and is expected to deliver an even larger earnings boost amid high WTI prices driven by the war in the Middle East. EPS is projected to rise a staggering 206% to $5.42, while revenues increase 36% to $61.0 billion. As one of the oil majors with the least production in the Persian Gulf, Chevron stands to be a major beneficiary of higher refining margins and increased US crude exports to Europe.