After major U.S. big tech companies announced their earnings, stock prices and corporate valuations diverged sharply.

This was analyzed as a result of investors beginning to seriously scrutinize whether massive expenditures on artificial intelligence (AI) investments are actually translating into actual sales and profits.

According to the Wall Street Journal on the 2nd (local time), Amazon and Microsoft saw their stock prices surge as they demonstrated cloud business growth and AI monetization potential.

In contrast, Apple and Meta Platform experienced significant declines due to earnings forecasts that fell short of market expectations and concerns about deteriorating cash flows.

Combined with a sharp rise in U.S. Treasury yields and unclear policy signals from the Federal Reserve, rapid fund movements between industries and individual stocks occurred beneath the market surface.

While AI growth expectations continued to serve as a powerful driver for gains, caution regarding high corporate valuations and interest rate burdens also intensified.

▲ Big Tech Earnings Show Stark Divergence in Stock Prices

Last week, the U.S. financial market faced crucial tests with big tech earnings and Federal Reserve monetary policy, but the results were inconclusive.

Earnings announcements from America's largest technology companies moved individual stock prices in opposite directions. Apple recorded its largest single-day decline since the tariff confusion, while Microsoft recorded the largest single-day market capitalization increase in U.S. public company history.

Amazon stock surged 15% in Friday trading following an announcement that revenue growth in its cloud computing business was accelerating.

Meanwhile, Apple's stock fell 7.4% as its September quarter earnings forecast fell short of Wall Street expectations. This was analyzed as reflecting investors' renewed concerns about growth prospects for the company's existing business centered on iPhone sales.

▲ Microsoft Surges 16%…Market Cap Increases by $450 Billion in One Day

Microsoft stock surged 16% following its earnings announcement. As a result, its market capitalization increased by approximately $450 billion in a single day, setting a record for the largest single-day market capitalization increase among U.S. companies.

Microsoft's surge reflected expectations that massive investments in cloud and AI businesses could translate into actual revenue growth.

Investors judged that costs invested in AI infrastructure building are not merely expenditures but are leading to expanded cloud usage and increased demand for corporate AI services.

This demonstrated that even among the same big tech companies, market evaluations vary significantly depending on whether AI investment results are proven through concrete numbers.

▲ Meta Falls 8% Over Cash Flow Concerns

Meta Platform stock fell 8% following its earnings announcement. The company's forecast that free cash flow could turn negative in the second half dampened investor sentiment.

Meta is also investing substantial funds in AI data centers and computing infrastructure, but concerns grew that increased costs in the short term would pressure its cash generation capability.

Until now, investors had tolerated big tech companies investing massive capital to secure long-term AI growth potential. However, as investment scale expanded to hundreds of billions of dollars and debt burdens increased, the market's attitude began to change.

Victoria Fernandez, senior market strategist at Crossmark Global Investments, analyzed that investors are no longer providing unconditional trust to companies and have begun demanding tangible results.

▲ Proving Profitability More Important Than AI Investment 'Scale'

The divergent movement in big tech stock prices showed that the evaluation criteria for AI competition are shifting from investment scale to return on investment.

In the past, stocks often rose simply from the fact that companies aggressively invested in data center and AI chip acquisitions. However, recently, maintaining high corporate valuations requires confirmation of actual results such as increased cloud revenue, expanded paying users, and improved operating profit.

Amazon and Microsoft received positive evaluations by demonstrating that AI infrastructure investments are translating into cloud business growth.

In contrast, Apple failed to sufficiently prove the short-term impact of its AI strategy on results, while Meta heightened concerns that investment expansion could burden cash flows.

It was analyzed that investors are beginning to evaluate companies individually based on their business models and monetization capabilities rather than viewing the entire AI industry as a single growth theme.

▲ Semiconductor Stocks Rebound But Down 21% for July

Announcements by major cloud operators that they would continue to expand AI infrastructure investments provided tailwinds for semiconductor, memory, and data center equipment-related stocks.

Hyperscalers including Amazon, Alphabet, Meta, and Microsoft signaled their intention to maintain AI capital investment, reviving expectations that demand for semiconductors, servers, and network equipment would continue.

The Philadelphia Semiconductor Index managed a slight increase on Friday. However, for July overall, it declined approximately 21%, showing that volatility in AI semiconductor-related stocks remains high.

This resulted from continued profit-taking in memory and semiconductor shares that surged at the beginning of the year, combined with expanding concerns about excessive stock price gains.

Goldman Sachs analyzed that it is a normal phenomenon for stocks that surged in a short period, like memory stocks, to subsequently undergo correction.

▲ Nasdaq Falls 3.2% in July…Greater Stock-Specific Volatility Than Index

The Nasdaq index fell 3.2% over July. In contrast, the Dow Jones Industrial Average rose slightly, and the S&P 500 index showed little change.

Looking only at major indices' movements, the market appeared relatively stable, but much greater fluctuations appeared in individual stocks and sectors.

Strategist Victoria Fernandez evaluated that while the market's surface appears stable, considerable fund movements and uncertainty are occurring internally.

As investors adjusted their weightings in existing technology stocks and distinguished between AI beneficiaries that proved results and those that did not, trading circulation within the market accelerated.

▲ Fed Chair's Comments Trigger Simultaneous Stock and Bond Selling

Monetary policy signals from the U.S. Federal Reserve also intensified financial market confusion.

Fed Chair Kevin Walsh held a press conference at his second Federal Open Market Committee meeting since taking office on Wednesday. The Fed kept the benchmark rate unchanged, but Walsh's remarks failed to provide the market with a clear direction.

He hinted that there may not be a strong need for additional rate increases in the near term, suggesting that rising market rates are already partially substituting for Fed tightening.

However, the bond market interpreted this as a weakening commitment to controlling inflation. Investors simultaneously sold stocks and bonds, and long-term Treasury yields surged.

Market analysts noted confusion in their assessments of the Fed press conference, to the extent that the uncertainty in monetary policy messaging was significant.

U.S. Stock Market [AFP/Yonhapnews]

▲ 30-Year Yield Hits Highest Level in 19 Years…Inflation Concerns Reignited

U.S. 30-year Treasury yields rose to the highest level in 19 years. This was interpreted as a signal that bond investors lack sufficient confidence in the new Federal Reserve leadership's commitment to controlling inflation.

On Friday, Treasury selling pressure intensified further. The U.S. 10-year Treasury yield hit its highest level in 18 months, with rates rising across all maturities from short-term to long-term.

As investors repriced the possibility of benchmark rate increases in the near future, the burden on the bond market expanded.

Fed Chair Walsh was reportedly reviewing measures to reduce the number of policy meetings held by the Fed. If the frequency of meetings actually decreases, substantial changes could occur in the monetary policy decision-making process and market communication methods.

▲ Rising Rates Create Direct Burden on Highly Valued Tech Stocks

When Treasury yields continue to rise, funding costs for businesses and consumers also increase.

Companies face difficulties in financing capital investments, mergers and acquisitions, and research and development expenses, while consumers face increased burdens from mortgage loans, auto loans, and personal credit loans. This could slow economic growth and place pressure on the stock market.

In particular, technology stocks that received high valuations based on future growth potential were sensitive to rising interest rates. This is because higher discount rates lower the present value of future earnings.

Semiconductor and software companies that have received high valuations due to AI expectations are placed in an environment where they could experience significant stock price adjustments if results fall even slightly short of market expectations.

▲ Middle East Tensions and Rising Oil Prices Remain as Variables

Geopolitical tensions in the Middle East remained as a risk factor for the U.S. financial market.

If conflicts expanded and international oil prices rose, U.S. inflation pressure could intensify again. Rising energy prices would increase transportation and production costs and reduce consumer disposable income.

If rising oil prices and surging Treasury yields occurred simultaneously, the Federal Reserve's monetary policy options could become even narrower.

A dilemma could arise where it becomes difficult to lower rates to prevent economic slowdown, and strengthening tightening to contain inflation would increase burdens on financial markets and the real economy.

▲ Employment Report and Consumer Company Earnings to Face Next Test

Investors focused on upcoming employment indicators and consumer company earnings to assess the state of the U.S. economy.

The U.S. employment report was scheduled to be released on Friday, and consumer-facing companies such as McDonald's and Walt Disney were also expected to disclose their earnings.

If employment appeared stronger than expected, the likelihood of the Federal Reserve raising interest rates would increase, and Treasury yields could rise further.

Conversely, if employment and consumer spending slowed rapidly, interest rate burdens could ease, but concerns about economic recession could weigh on stock markets.

Earnings from consumer-related companies were expected to be a key indicator for determining whether American consumers are maintaining spending amid high interest rates and inflation concerns.

▲ S&P 500 Profit Growth at 47%...Foundation for Bull Market Remains Intact

Despite skepticism about interest rates and AI investments, factors supporting the strength of U.S. stock markets remained.

The overall profit growth rate for S&P 500 companies, calculated by combining actual earnings reports and market forecasts, was tallied at approximately 47%, marking the highest level in over five years.

Market analysts continued to raise their profit forecasts for the next quarter. If corporate earnings maintain a generally resilient trend overall, the possibility of the entire stock market collapsing sharply despite some adjustments in technology stocks could be limited.

AI investment spending from Amazon, Alphabet, Meta, and Microsoft surged dramatically, but these companies' revenues are expected to grow at an annual rate of 18% over the next two years.

▲ Market's Fundamental Strength Overshadowed by AI Narrative

Joseph Zappia, co-chief investment officer at LVW Advisors, assessed that while considerable soundness exists within the market, all attention has been overshadowed by debates over AI investments.

The U.S. economy was still in an expansion phase, and corporate profits were growing rapidly. If the upward trend spreads to sectors beyond technology stocks, the stock market could attempt additional gains while absorbing the volatility of AI-related stocks.

However, the critical questions remain: how long the economic expansion will continue and at what point asset prices will reach excessive levels.

Zappia analyzed that currently, there are not many signals indicating that the economy and market have reached their limits.