Good morning, traders…
At the top of last week, the market was cruising.
Tech stocks were rallying. The Fed was cutting. Momentum was building.
Until two earnings reports threw a wrench into everything.
Two companies. Two different results. Same outcome.
Traders freaked out, causing the Nasdaq to drop over 2% on Friday.
When big tech names tank on earnings, they drag the entire index down with them.
The Nasdaq is packed with these stocks, so their moves are magnified.
AI earnings have more impact on the current market direction than anything else.
One bad comment on a conference call can wipe out weeks of gains, even when the actual numbers beat expectations.
AI Earnings Control The Market (And The Bar Just Got Higher)…
Oracle Missed Revenue (And Got Crushed)
Oracle beat on earnings per share but missed on revenue, especially in cloud.
It also announced higher-than-expected capital spending for AI infrastructure.
We’re talking tons of money on data centers, chips, all of it.
The market didn’t like it. Investors wanted better top-line numbers.
Revenue miss + massive spending = future growth concerns.
Traders are wondering if Oracle’s AI build-out will take way longer to pay off than anyone expects.
Confidence in the near-term story evaporated.
The stock plunged by double digits.
And that wasn’t even the worst move of the week…
Broadcom Beat Everything (And Still Sold Off)
Broadcom crushed earnings, beat revenue, and raised guidance.
Everything looked great on paper.
Until management got on the call…
They mentioned that gross margins on AI products are lower than expected.
And that’s all it took:
Investors aren’t just looking for growth anymore. They want growth with strong margins. Any hint that margins might compress? The stock gets sold off, even when the numbers themselves are solid.
This is why earnings “beats” don’t always lead to the moves you expect.
The headline numbers looked perfect. But one comment about margins and traders started dumping shares.
Broadcom had run up hard during the AI rally. When the quarter came in “good but not amazing,” it turned into a sell-the-news event.
The call reinforced doubts that AI spending automatically translates to fat margins. Traders took profits and moved on.
Why The Nasdaq Dropped Over 2%
The Nasdaq is loaded with tech stocks.
Approximately 65% of the index has broad tech exposure, with 45-50% in core AI-relevant companies.
When Oracle and Broadcom tank, the index feels it immediately.
More concerning: these earnings seem to be sparking questions about the entire AI story.
Can the AI boom keep going if margins are getting squeezed and companies are burning cash on infrastructure that might not pay off for years?
That question spread beyond Oracle and Broadcom. Other AI stocks started selling off.
The negative tone created a sector-wide dump instead of staying isolated to those two names.
High-growth tech got crushed. Traders reduced risk across the board.
The Truth About AI Earnings
In 2026, AI earnings are set to control the market direction more than anything else.
You can’t just look at the headline beat or miss.
You need to listen to what management says on the calls.
One comment about margin compression tanks a stock (even when earnings beat).
One capex announcement that’s higher than expected triggers sector-wide selling (even when revenue crushes).
The market’s tolerance for “good but not great” AI earnings is gone.
Growth alone doesn’t justify these valuations anymore. Traders want both growth and profitability.
They want to have their cake and eat it too.
That’s why you’ve gotta watch the next wave of AI earnings closely.
If this trend continues (strong growth but margin concerns), we could see more rotation out of high-multiple tech and into value or defensive plays.
The AI story is far from over. But the bar for what counts as a “good” AI earnings report just got way higher.
Happy trading,
Ben Sturgill
*Past performance does not indicate future results
