Welcome to the ‘show me the money’ quarter

New York (CNN) — Silicon Valley’s biggest names are about to reveal if their massive artificial intelligence investments are paying off or just burning cash. And the timing couldn’t be spookier.

In what some analysts are calling the “show me the money” quarter, most of the major US tech titans will report earnings during Halloween week. Google-parent Alphabet kicks things off Tuesday, followed by Microsoft and Meta on Wednesday. The grand finale comes on Halloween day, when Apple and Amazon report third-quarter results. Nvidia, meanwhile, reports closer to Thanksgiving, on November 20.

“Tech companies have been spending billions on AI like kids in a candy store,” said David Laut, chief investment officer at Abound Financial. “Now investors want to see what they’re getting for their money.”

Earnings season for tech got off to a strong start Wednesday evening when Tesla surprised Wall Street with better-than-expected earnings. The electric vehicle maker managed to boost profits by slashing the cost to build each car by $2,400 compared to last year, even as it wages a price war with competitors. The results sent Tesla’s shares surging more than 11% in after-hours trading, potentially setting a positive tone for next week’s parade of tech earnings.

But the stakes remain huge for the rest of the so-called magnificent seven companies. Nvidia, the company making chips powering the AI boom, is now worth more than the entire stock markets of Canada and France.

The pressure may be strongest on Google and Microsoft, two companies locked in battle for AI supremacy. Google will need to prove that its AI tools are attracting paying business customers, while Microsoft is aiming to show that its multibillion-dollar partnership with ChatGPT-maker OpenAI is generating real revenue.

Meta, meanwhile, is betting that AI can add some fuel to its floundering advertising business, and Amazon is looking to convince investors that AI is driving growth in the cloud.

But there’s more spooking Wall Street than just tech earnings. Markets are growing increasingly nervous about next week’s Federal Reserve meeting, where officials will signal if more interest rate hikes are coming. Add to that a presidential election that’s looking increasingly close as well as growing geopolitical tensions, investors have plenty of reasons for concern.

“Maybe the long-awaited close election sell-off is arriving, albeit after six successive weeks of rallying,” wrote Deutsche Bank’s Jim Reid in a note last week.

For average investors, the next few weeks could determine whether their tech-heavy portfolios thrive or flounder.

“We believe tech stocks could jump another 20% higher in 2025 if companies show AI is actually making them money,” said Dan Ives, an analyst at Wedbush Securities.

By Halloween night, as trick-or-treaters make their rounds, investors will have a better idea of whether Big Tech’s massive AI bet is finally starting to pay off, or if the promise of artificial intelligence turns out to be more trick than treat.

The-CNN-Wire
™ & © 2024 Cable News Network, Inc., a Warner Bros. Discovery Company. All rights reserved.