Big tech's earnings are usually a tell for chip demand, but this week they came with mixed signals. Now, the market will look to a few events in the coming months to reignite chip stocks.
The iShares Semiconductor ETF, home to artificial intelligence chip makers Nvidia, Advanced Micro Devices, Broadcom, Taiwan Semiconductor Manufacturing Co., Micron Technology, and others, remains more than 20% below record highs. The overarching concern: that big tech companies will slow the growth of their data center spending in the face of higher interest rates, large debt loads, and the market's demands for quicker returns on investment.
Wednesday, the semiconductor ETF dropped another 1.6%, even after Microsoft's guidance of more than $50 billion in current quarter capital expenditures, partly because of chip and memory spending. Before Microsoft earnings, analysts had that number pegged below $48 billion. The increase still wasn't quite enough to boost chip stocks.
That's possibly because of what the other tech companies said about capex. Alphabet didn't raise capex guidance for the full year, keeping it at $200 billion -- the midpoint of its range. Oracle's investor day revealed that while it will grow capex aggressively in the near term, its 2029 spend will be tens of billions of dollars less than what analysts had forecast. Amazon.com's third quarter earnings release Thursday revealed the company held steady its $220 billion capex expectation for the full year.
Also not helping the chips was Alphabet's cloud segment results. While certainly positive where Google's efforts are concerned -- Google Cloud generated $30.7 billion of revenue, roughly doubling year over year, partly driven by sales of TPUs, Alphabet's in-house chips -- this could eat into Nvidia's market share.
Intel's earnings release couldn't take chips higher, either. Earnings beat estimates, though part of the disappointing fourth quarter revenue guidance emanated partly from a plant explosion in Israel. Intel, specifically, has a history of ups and downs.
So the chip names didn't get what they needed to emerge from the recent rubble. The good news is that there are catalysts coming up that could do the trick for an industry that has already seen large share price declines.
Nvidia's third quarter earnings are due Nov. 17. It has only missed data center sales estimates, currently at $101.5 billion, three times in the past 20 quarters according to FactSet. Its average result is 5.1% above estimates.
While the market is already well aware of this track record, this is still helpful data for investors. Those types of results can prove enough to lift the stock when it comes into earnings having dropped already. After the late August report, Nvidia beat data center forecasts and saw its stock rise 8.7% the following day, after having fallen in the months leading up to the event, sending the chip fund up 2% that day. A repeat of that day could boost the chip ETF.
The picture for chips after Nvidia's earnings doesn't have to appear so damning. Sure, Oracle's "step-down" in 2029 capex, as management framed it, is scary. But Oracle's capex is uniquely volatile, with analysts modeling $89 billion of capital investment in 2027 for 16% growth, and then a drop at the end of the decade. For Microsoft, Alphabet, Meta Platforms, and Amazon.com, consensus still expects growth through the end of the decade, with the aggregate spending figure reaching over $1 trillion by then.
The point isn't that those forecasts are supposed to be exacting, rather that they illustrate a path for continued growth. That bodes well for chip demand growth.
Dave Wagner, portfolio manager and head of equities at Aptus Capital Advisors, acknowledges that spending projections for several years from today are difficult to pin down accurate. But "the growth still very much resides in this space [chips]," he says.
Micron reports earnings Dec. 23, likely the last major catalyst for semiconductors -- if not all of big tech -- in calendar 2026. But CES 2027, with its series of keynotes, kicks off Jan. 6.
That then puts Alphabet's fourth quarter into the spotlight. "We continue to expect our Capex to increase significantly in 2027 and will provide further details on our Q4 call," said Anat Ashkenazi, Alphabet's chief financial officer on the earnings call Wednesday evening.
Analysts forecast $318 billion of capex for 2027. Guidance that implies a similar or higher number than that would support chip stocks.
These catalysts could stoke chip stock gains. The semi fund trades at just under 19 times next 12 months earnings, roughly in line with the S&P 500's multiple, and near the low end of its range this year. The 2026 peak was 32 times. Some premium multiple to the S&P 500 could look reasonable if the market becomes better convinced that chips can sustain higher earnings growth versus the rest of the market.
Whatever the multiple, any of these catalysts could make chips' profit outlook appear solid enough -- and lift the stocks from their current levels.
For chips, "It's not a space I want to be underweight," Wagner says.
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