AI Feast or Capital Bubble? Tech's Big Seven Earnings Reveal Short-Term Fate of the Nasdaq

February 2026 is ultimately an extraordinary month. Just as February begins, the financial markets experience a silent yet fierce “battle”: the precious metals market faces a “black week,” with gold and silver prices plunging sharply, and London silver prices dropping over 12% in a single week; tech giant Microsoft leads the earnings reports, and despite revenue and profit surpassing expectations, concerns over core business issues trigger a negative market reaction, causing its stock price to fall significantly after hours.

Amid these shocks, investors remain highly alert, continuously focusing on the future trends of precious metals and the US dollar, while also turning their attention to the upcoming earnings reports of major tech companies—such as Alphabet, Amazon, and others. Coupled with key market factors like the upcoming US employment report and whether Congress can resolve the government shutdown crisis on time, these elements collectively form the core variables influencing short-term US stock movements. As a “bellwether” for tech stocks, the short-term outlook of the Nasdaq Composite Index has become a market focus: in the context of dense earnings reports from the “Big Seven” tech giants and ongoing macroeconomic uncertainties, can the Nasdaq break free from recent volatility and start a new upward trend?

1. Earnings Season Begins

Wall Street’s attention is now focused on the so-called “Big Seven” tech earnings season. Microsoft, Meta, and Tesla have already reported their results at the end of January, while Apple, Nvidia, Amazon, and Alphabet (Google’s parent company) have released their earnings over the following two weeks.

Market expectations for these tech giants’ quarterly performance are not uniform but come with clear questions. LPL Research notes in its report that, excluding Tesla, the other “Six Giants” will contribute over 60% of the S&P 500’s earnings growth this quarter. FactSet senior earnings analyst John Butters projects that the “Big Seven” will achieve a combined earnings growth rate of 20.3% in Q4, far exceeding the 4.1% year-over-year EPS growth of other companies.

Investors are primarily concerned with: when will the hundreds of billions or even trillions of dollars in AI capital expenditures translate into substantial profits?

2. Earnings Divergence and Market Feedback

Divergence in earnings results has already become apparent. As the first batch of results from Microsoft, Tesla, and Meta are released, market reactions show distinct differences.

In absolute terms, the “Big Seven” are expected to have accumulated capital expenditures exceeding $600 billion in 2026. Market focus on “who can profit from AI infrastructure and monetization momentum” and “who can sustain spending without eroding free cash flow” has overshadowed discussions about the “authenticity” of their AI strategies.

Microsoft’s second-quarter capital expenditure (including finance leases) was $37.5 billion, about 9% above expectations, but Azure’s growth did not accelerate proportionally, leading to a decline in its stock price in after-hours trading. Notably, despite market skepticism, some Wall Street institutions believe Microsoft will prioritize capital spending on self-developed applications and internal R&D rather than short-term revenue maximization, potentially building a more strategic AI layout for better long-term returns.

In stark contrast, Meta not only reported Q4 revenue of $59.89 billion, up 24% year-over-year and surpassing expectations, but also saw its advertising revenue perform strongly, up 24% to $58.14 billion. More importantly, Meta provided an optimistic outlook, projecting capital expenditures could reach as high as $135 billion in 2026, nearly double last year’s figure.

Market reactions show clear structural divergence: Microsoft faces pressure due to Azure’s slowing growth and disproportionate capital spending, while Meta gains favor thanks to robust ad revenue and a clear capital expenditure roadmap.

Tesla’s situation reflects challenges faced by the consumer electronics and automotive industries. Its latest earnings show 2025 was the first year in company history with both revenue and deliveries declining year-over-year. However, a gross margin above 20% and a 25% YoY increase in energy business offer alternative interpretations.

3. Alphabet’s Billion-Dollar Bet and Amazon’s Unresolved Puzzle

When Alphabet announced its Q4 2025 earnings, the market received a comprehensive beat: revenue of $113.828 billion, up 18% YoY; net profit of $34.455 billion, nearly 30% higher YoY. However, what truly shook Wall Street was not these historic numbers but the company’s astonishing future investment outlook. Alphabet expects capital expenditures to reach $175–$185 billion in 2026, nearly double the actual spending in 2025 and far exceeding the market consensus of around $120 billion.

Figure 1: Alphabet Earnings Report

The core concern is: with global digital ad spending expected to grow 5.1% in 2026, surpassing $1 trillion for the first time, can Alphabet, whose main revenue source is advertising, sustain its capital expenditure intensity without eroding profitability?

While the market is still digesting Alphabet’s billion-dollar expenditure guidance, attention has shifted to another tech giant—Amazon. Analysts generally forecast Amazon’s capital expenditures in 2026 could reach about $146 billion, maintaining its position as the largest spender among the “Big Seven.”

Amazon’s earnings will provide critical evidence to verify the reasonableness and sustainability of the massive capital spending by tech giants. Meanwhile, Amazon’s cloud computing division AWS remains the world’s largest cloud infrastructure provider, though its growth rate has been caught up by Microsoft Azure.

4. The Cumulative Effect of Macro Factors

The outlook for tech stocks depends not only on corporate profitability but also on macroeconomic conditions and policy developments. Subtle changes in labor market data could be key to shifting Federal Reserve policy.

Currently, the market widely expects an 86% probability that the Fed will keep interest rates unchanged at the January FOMC meeting, with the first rate cut likely around June. These rate expectations directly impact tech stock valuations, especially in a high-interest environment where future cash flow discount rates rise, putting pressure on high-valuation tech stocks.

The US political environment also adds uncertainty. Although Democrats and Republicans have reached a short-term agreement to avoid a government shutdown, with funding for the Department of Homeland Security temporarily separated and a two-week extension of funding, this short-term fix merely delays more complex policy disagreements.

5. The Sharp Drop in Gold and Silver and Its Subtle Connection to Tech Stocks

Recently, gold and silver prices have plummeted sharply. While this may seem unrelated to tech stocks, it actually reflects changes in market risk appetite. Gold and silver are typically seen as safe-haven assets; when uncertainty rises and risk appetite declines, funds flow into these assets, pushing prices up. Conversely, the recent plunge indicates increased risk appetite, with investors more willing to allocate funds to riskier assets. However, from another perspective, this may also signal a shift in economic outlook expectations. If investors believe the economy faces recession risks, they might sell both tech stocks and precious metals to seek safer assets. Therefore, the sharp decline in gold and silver also exerts some pressure on tech stocks.

6. Nasdaq’s Short-Term Trend and Response Strategies

In the short term, the Nasdaq’s movement will depend on a tug-of-war among multiple forces: the validation of tech giants’ earnings, macroeconomic data signals, geopolitical and regulatory shadows. Currently, the market environment suggests the Nasdaq will likely remain in a “volatile bottoming” phase, difficult to establish a clear trend. A rebound would require key catalysts—mainly, better-than-expected earnings from Alphabet and Amazon, and employment data aligning with or falling short of expectations, boosting Fed rate cut expectations.

CME Group’s Global Research Director Matt Weller points out that market focus is shifting from “who spends the most” to “who can sustain spending without eroding free cash flow.” Especially as AI monetization takes longer than expected, companies that can demonstrate strong ROI and cash generation will be favored.

Although the Nasdaq faces short-term volatility, from a long-term perspective, the core competitiveness of tech leaders remains intact, and the long-term upward trend of the Nasdaq is still valid. The reasons are threefold: first, the core strength and growth potential of the “Big Seven” remain robust; second, the Fed’s rate cut cycle is about to begin, likely boosting valuations of growth stocks; third, global capital demand for US tech stocks remains strong.

Figure 2: Performance of the Big Seven over the Past Year

Based on the above analysis, investors should adopt a cautious approach in trading, controlling positions, focusing on core tech leaders, seizing industry growth opportunities, and diversifying investments to hedge against sector-specific risks. It may also be prudent to allocate some financial derivatives, such as CME’s E-mini Nasdaq 100 options, which are highly responsive to earnings season volatility. The surge in 0DTE (zero days to expiration) options and short-term options highlights investors’ increasing demand for precise and flexible trading. As major stocks like Meta, Tesla, and Apple release earnings, E-mini Nasdaq 100 options can help traders accurately lock in event-driven volatility and avoid macroeconomic “noise.” With expirations available every trading day, investors will have sufficient granularity and flexibility to navigate earnings season.

Figure 3: DTE Volume Trends of E-mini Nasdaq 100 Index Options (2021–2025)

In summary, with the “Big Seven” tech earnings approaching, the Nasdaq faces short-term volatility tests, but its long-term upward trend remains unchanged. Investors should stay rational, remain alert to short-term risks, and seize medium- to long-term growth opportunities in the tech sector, seeking reasonable investment opportunities amid market fluctuations.