Wall Street AI Rally Faces Test as Meta, Tesla, Lam Research Earnings Arrive Next Week
The Wall Street AI rally faces a test next week after the S&P 500 posted its biggest weekly drop since June. AI-linked shares, including chipmakers and hardware firms such as Dell Technologies, fell sharply. Quarterly results from Meta, Tesla, Lam Research and Texas Instruments are due on Wednesday, October 21.
Wall Street AI rally: the numbers
| Reading | Detail | Signal |
|---|---|---|
| S&P 500 | Biggest weekly drop since June; about 2% below October record | Pullback, not a collapse |
| Philadelphia Semiconductor Index | Down about 12% in October; up 57% in 2026 | Momentum cooling |
| S&P 500 in 2026 | Up about 12% | Semiconductors lead by about 45 points |
| Lam Research / Texas Instruments | Up 54% / 59% in 2026 | Strong gains before earnings |
| Q3 S&P 500 earnings growth | More than 30% expected (LSEG IBES) | High bar for results |
Healthcare and consumer staples, which lagged during the earlier technology-led rally, posted solid gains. That suggests some money rotating away from tech, a point Garrett Melson of Natixis Investment Managers Solutions made about the market's heavy focus on AI.
Financing worries
Concerns about how AI projects are funded weighed on sentiment. CoreWeave, an AI cloud company with about $50 billion in debt, fell sharply during the week. Strategists at Deutsche Bank and RBC Capital Markets cut their views on technology. Deutsche Bank strategists said on October 9 that the shift into tech had gone far and near-term risks no longer justified the rewards.
What earnings must show
Five hyperscalers are expected to lift combined capital spending to about $1.2 trillion next year, according to Goldman Sachs. Kevin Shea, senior equity analyst at BNY Wealth, said the key issue is whether hyperscaler profits can grow faster than capital expenditure. Meta, with a market value of about $1.8 trillion, is the first to report. Chuck Carlson, chief executive of Horizon Investment Services, said higher spending raises the returns investors expect and that Meta would be first to shed light on this.
Rates and inflation
US inflation data this week came in higher than expected, and Treasury yields rose. Higher yields raise corporate borrowing costs and can make bonds more attractive than stocks. Investors are watching the Federal Reserve's meeting at the end of October. Futures still pointed to a possible rate rise in December. UBS Global Wealth Management analysts said another strong earnings season could support stocks even if rates rise slightly.
What to Watch
- Tuesday, October 20: Netflix is expected to report.
- Wednesday, October 21: Meta and Tesla are due after the close, alongside Lam Research and Texas Instruments.
- SpaceX, Procter & Gamble and GE Aerospace also report in the coming week.
- End of October: the Federal Reserve's policy meeting.
