S&P 500 earnings growth expected at 27%, with Micron and Nvidia doing the heavy lifting

Key Takeaways

• The S&P 500 is expected to report 27% year-over-year earnings growth, driven by spending on artificial intelligence infrastructure.
• Micron and Nvidia are projected to supply more than one-third of the growth.
• The growth is largely concentrated in a few companies, with the median S&P 500 constituent not growing anywhere near 27%.

Market & Token Impact

• The expected growth is driven by spending on AI infrastructure, which is anticipated to drive more than half of the index's overall earnings increase.
• Information technology and energy together are expected to contribute nearly 80% of total EPS growth for the quarter.
• Nvidia's upcoming report will be the marquee event, with expectations set around 90% EPS growth.

Broader Context & What's Next

• This earnings season marks the eighth consecutive quarter of double-digit earnings growth for the S&P 500.
• Fourteen of 16 Zacks sectors are expected to report positive EPS growth this quarter.
• Investors will want to know whether AI infrastructure spending is set to keep accelerating or whether the slowdown from 33% to 27% is an early hint of a cooling trend.
• Guidance will matter as much as backward-looking results, with investors looking for signs of sustained growth in AI-related capital spending.