The First AI Earnings Clue Is In
The Weekend Edition is pulled from the daily Stansberry Digest.
We're searching for stability...
As uncertainties abound in the U.S. and abroad (i.e., Iran), most of us are looking for a little solid ground.
I didn't expect to find it in economic data releases. But here we are.
On Tuesday, the Bureau of Labor Statistics published its latest inflation report on time for the first time in months... after being shuttered during the partial government shutdown.
The bad news? Inflation.
The December 2025 consumer price index ("CPI") rose 2.7% year over year. Certain items saw much larger price gains – like some food categories (beef was up 16%), car parts and repair (up more than 5%), and natural gas service (up almost 11%).
Grocery prices and costs for "food away from home" (translation: restaurants) rose 0.7% from November. That's an annualized rate of more than 8%. So rising prices remain a challenge that Americans face every day.
That said, "premium" spending continues...
Earnings season is underway again. As usual, that means it's time to comb through quarterly financial reports and company executive comments for insights on the economy.
And so far, while investors have punished some stocks for earnings misses, the AI boom's outlook is strong...
On Tuesday morning, JPMorgan Chase (JPM), a few other banks, and Delta Air Lines (DAL) got things going for the quarter. These companies illustrated something similar in different ways. Let's start with JPMorgan...
The financial giant beat on both revenue and earnings (excluding a pre-announced $2.2 billion charge related to its takeover of the Apple Card loan portfolio from Goldman Sachs). Nearly all of JPMorgan's segments grew revenue in the fourth quarter, with only its investment banking business seeing a decline.
And CEO Jamie Dimon gave a positive view of the U.S. economy. From the press release...
The U.S. economy has remained resilient. While labor markets have softened, conditions do not appear to be worsening. Meanwhile, consumers continue to spend, and businesses generally remain healthy.
Shifting over to Delta Air Lines, the travel giant was also optimistic about consumers – especially on the wealthier end. The company's fourth-quarter results were mixed (earnings beat estimates, but revenue fell short), and its 2026 forecast missed expectations.
However, CEO Ed Bastian said that a year of record earnings is in reach for the company. He added that "virtually all" of Delta's growth will come from premium tickets, not "main cabin" bookings.
Still, investors punished Delta shares for its revenue and earnings forecast misses. That's a trend we're seeing so far this earnings season...
But of course, there's still a long way to go.
What This Earnings Season Could Mean for the AI Boom
Looking ahead to the rest...
All in all, Wall Street expects the S&P 500 Index's earnings per share to rise about 8% for the fourth quarter of 2025, according to FactSet. That would mark the 10th straight quarter of positive earnings growth for the index going all the way back to the "earnings recession" of 2022 and 2023.
Banks and other financial companies are among the first to report, but they won't be the most-watched group. That honor goes to AI stocks, many of which fall into the "Information Technology" sector.
And folks have been getting more bullish about AI's impact on the tech sector. From FactSet's Earnings Insight report...
Heading into the start of the earnings season, both analysts and companies have been more optimistic than normal in their earnings outlooks for the fourth quarter. However, it should be noted that most of this optimism is concentrated in one sector: Information Technology.
The S&P 500's information-tech sector includes companies like Apple (AAPL), Microsoft (MSFT), and Palantir Technologies (PLTR) – some investor favorites when it comes to AI.
But there's one company that's more important than the rest... chipmaker and AI darling Nvidia (NVDA). The AI boom has propelled Nvidia to become the largest company in the world by market cap. As a result, it now has the largest weighting in both the tech sector and the S&P 500.
Here's more from FactSet's report...
At the company level, Nvidia [at $1.52 vs. $0.89 earnings per share year over year] is expected to be the largest contributor to earnings growth for the sector. If this company were excluded, the estimated earnings growth rate for the Information Technology sector would fall to 18.1% from 25.9%.
As CNBC commentator Josh Brown noted at our annual conference in October, Wall Street is expecting more and more from Nvidia. And we don't know how Mr. Market will react if and when the company doesn't have a blowout quarter.
Folks will have to wait a while to find out, though. Nvidia's earnings likely won't come until late February. Until then, investors will have plenty of other reports to dig through.
These releases will tell us what's going on in the real economy and the ongoing AI boom.
On Thursday, we got our first clues on how the AI boom has gone in the most recent quarter...
Taiwan Semiconductor Manufacturing (TSM) is the world's largest contract AI-chip manufacturer. Its customers include Nvidia and Advanced Micro Devices (AMD). In the fourth quarter, Taiwan Semiconductor reported a 20.5% jump in revenue and a 35% increase in net income.
Looking forward, Taiwan Semiconductor forecasts a 38% jump in revenue in the first quarter.
When it comes to AI products specifically, the company sees sales growing 50% per year through 2029. And here's what CEO C.C. Wei said about the AI boom as a whole on the company's earnings call...
AI is real. Not only real, it's starting to grow into our daily life.
That might sound familiar... Nvidia CEO Jensen Huang also explicitly called out the "AI bubble" fears on the company's November earnings call...
There's been a lot of talk about an AI bubble. From our vantage point, we see something very different.
This earnings report and the outlook from Taiwan Semiconductor suggest the same. The company manufacturing all these AI chips still sees ferocious demand... And the AI boom still has legs.
Good investing,
Corey McLaughlin with Nick Koziol
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