- Markets reacted unevenly to the earnings reports from three of the Magnificent Seven on Wednesday evening.
- Rising costs and high valuations are making investors cautious.
- Analysts believe the next wave of tech growth may come from smaller, lesser-known companies.
- Looking for actionable trade ideas to navigate the current market volatility? Subscribe here to unlock access to InvestingPro’s AI-selected stock winners.
Markets reacted differently to the earnings of (NASDAQ:MSFT), (NASDAQ:GOOGL), and (NASDAQ:META) released last night. fell more than 3.5% after hours, dropped 6.5%, while rose 6.5%.
Alphabet’s shares climbed after it beat Wall Street’s expectations for third-quarter sales, driven by steady growth in its main advertising business and cloud division.
The company also raised its full-year capital spending forecast to between $91 and $93 billion, higher than earlier estimates of about $80.7 billion.
Microsoft also posted earnings and revenue above expectations, but investors were concerned about its rising capital spending — nearly $35 billion last quarter, mostly for AI projects. The company also cautioned that these expenses will continue to grow.
Meta faced a sell-off even after reporting solid results. The company took a one-time charge of almost $16 billion related to US President Donald Trump’s Big Beautiful Bill and said next year’s capital spending would be much higher than in 2025 due to its expanding AI investments.
Meta has stepped up its push into AI. CEO Mark Zuckerberg has been leading an aggressive hiring drive and announced plans to spend hundreds of billions of dollars building large AI data centers aimed at developing superintelligence.
Investors, however, are growing uneasy about Big Tech’s surging AI costs. Valuations are already high, and there is still little proof that AI adoption is meaningfully improving productivity.
From an investor’s view, this does not signal the end of the AI-driven tech rally. Instead, the market is likely entering a new phase where attention shifts away from the biggest names.
The next wave of growth may come from smaller, lesser-known companies that still trade at reasonable valuations and have stronger upside potential than the already expensive Mag 7 stocks.
Where to Look for the Next Big Opportunities in Tech
Finding these lesser-known opportunities in tech is exactly what Tech Titans, one of InvestingPro’s AI-managed strategies, is built for.
After a strong October, the strategy is on track to close November with solid gains.
The eight stocks added at the start of the month have delivered an average return of 4.8%, led by a 33.5% rise in and a 15.4% gain in .
Several other stocks already in the portfolio also delivered strong returns this month, pushing the strategy’s total performance to 2,755% over 12 years — 2,373% higher than the S&P 500 over the same period.
As October comes to an end, the monthly update for ProPicks AI strategies is just around the corner. The recommended moves for November will be released by this Saturday for Tech Titans and the many other AI-managed strategies available to InvestingPro subscribers.
Finally, please note that the features mentioned in this article are far from being the only InvestingPro tools useful for market success. In fact, InvestingPro offers a whole range of tools enabling investors to always know how to react in the stock market, whatever the conditions. These include:
- AI-managed stock market strategies re-evaluated monthly.
- 10 years of historical financial data for thousands of global stocks.
- A database of investor, billionaire, and hedge fund positions.
- And many other tools that help tens of thousands of investors outperform the market every day!
Not a Pro member yet? Check out our plans here.
Disclaimer: This article is written for informational purposes only. It is not intended to encourage the purchase of assets in any way, nor does it constitute a solicitation, offer, recommendation or suggestion to invest. I would like to remind you that all assets are evaluated from multiple perspectives and are highly risky, so any investment decision and the associated risk belongs to the investor. We also do not provide any investment advisory services.