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Q1 earnings: fantastic (but with a caveat) … Tech does the heavy lifting… Luke Lango’s “Summer of AI” … one stock from Louis Navellier for a summer surge… nervous about buying Tech today? Don’t be
As I write on Wednesday morning, the markets are in rally mode thanks to positive geopolitical and earnings news.
First, Axios reported overnight that the U.S. and Iran are nearing a one-page memorandum of understanding to end the war and set a framework for nuclear negotiations.
President Trump, characteristically, is keeping everyone guessing. He called a deal “perhaps, a big assumption” and warned that “if they don’t agree, the bombing starts.”
Still, this is progress – fragile though it might be.
In response, oil is pulling back sharply, with Brent Crude falling from $114 to $101 a barrel and West Texas Intermediate Crude down from $102 to $95.
That’s still elevated, but encouraging, nonetheless. Reopening the Strait of Hormuz would be an enormous pressure-release for the economy.
Meanwhile, on the earnings front, Advanced Micro Devices Inc. (AMD) is the big headline winner of the day.
AMD beat on both the top and bottom line last evening, reporting revenue of $7.44 billion – up 36% year-over-year – driven by a 57% surge in its Data Center segment.
It’s yet more proof that the AI infrastructure buildout is very much intact.
Which brings us to the broader earnings picture this season…
Fantastic…but with a caveat
That’s the simplest way to sum up our Q1 earnings season so far.
At a high level, the numbers have been impressive. To illustrate, here’s FactSet, which is the go-to earnings data analytics group used by the pros:
For Q1 2026, the blended (year-over-year) earnings growth rate for the S&P 500 is 27.1%.
If 27.1% is the actual growth rate for the quarter, it will mark the highest earnings growth rate reported by the index since Q4 2021 (32.0%).
Remember that the Q4 2021 reference point was a period of surging economic activity in the post-COVID reopening. So, the fact that we’re in the same general ballpark is noteworthy.
Plus, the numbers have been coming in far better than forecasts from just weeks ago.
Back to FactSet:
On March 31, the estimated (year-over-year) earnings growth rate for the S&P 500 for Q1 2026 was 13.1%.
Ten sectors are reporting higher earnings today (compared to March 31) due to positive EPS surprises and upward revisions to EPS estimates.
Also, these earnings came during a period of economic stress that, fundamentally, is a headwind to growth.
On that note, here’s our technology expert, Luke Lango, from his Innovation Investor Daily Notes:
[This earnings season growth is being] reported in the middle of an active Middle Eastern war. While oil was at $90-120. While the consumer was drawing down savings to cover grocery bills. While the Fed was paralyzed between inflation and stagnation.
So, that’s the “fantastic” part.
What about that caveat?
Well, this is a classic case where the average hides a skewed distribution. When we look under the hood, we see a significant performance gap.
Tech is the name of the game
The “Magnificent 7” and their peers continue to carry the heavy weight of this earnings growth.
To illustrate, without the Technology sector’s outsized contribution, the S&P 500’s Q1 earnings growth would plummet from double digits to roughly 5%.
To be clear, I’m not saying that Non-Tech is having a bad quarter. In fact, only two sectors are currently reporting year-over-year earnings declines (Health Care and Energy). What I’m saying is that while Non-Tech growth is “fine,” Tech’s growth is “phenomenal.”
For example, positive surprises from Alphabet Inc. (GOOGL), Meta Platforms Inc. (META) and Amazon.com Inc. (AMZN) last week accounted for a staggering 71% of the total net dollar-level increase in earnings for the entire S&P 500 over that week.
As Luke has been saying for months at this point, there’s Tech…and then everything else.
How this translates into stock prices and your portfolio
Let’s take this down to the portfolio level.
To get a bead on what’s really happening with this market, let’s look at the S&P 500 ($SPX), the S&P 500 Equal Weight Index ($SPXEW), and the SPDR Technology Select Sector ETF (XLK).
The S&P 500 is our baseline… the Equal Weight Index gives us a better idea of how the average S&P company – not necessarily “Tech” – is doing because it assigns equal weight to every company… and XLK is our proxy for pure Tech.
Below, we’ll look at the respective performances since the market’s late-March low.
While the S&P Equal Weight has posted a strong rebound – up 9%- the Big-Tech-weighted S&P 500 Index is almost doubling that return at nearly 16%.
But that’s nothing compared to XLK – pure Tech – which has exploded 32%.
We have a market where a handful of Tech companies are delivering “extraordinary” growth fueled by a generational shift in AI, while the rest of the market is delivering positive, but “ordinary” growth.
Here’s Luke’s bottom line:
Earnings are going up right now. By a bunch.
But they are going up the fastest in the world of AI. Which means that while the stock market will likely keep pushing higher, AI stocks will keep leading the pack.
Welcome to the Summer of AI.
One stock to consider for this Summer of AI
I can’t write a Digest about earnings strength without turning to legendary investor Louis Navellier, editor of Growth Investor.
Earnings aren’t just a metric Louis tracks – they’re the foundation that his entire four-decade career is built on.
The logic behind his quantitative algorithms is straightforward: when a company consistently beats earnings expectations, institutional money follows. And when the big money moves in, stock prices follow.
Now, Louis and his Growth Investor subscribers have been having a phenomenal earnings season – for example, last week, 16 of the 20 companies in his portfolio that reported earnings beat estimates, with an average earnings surprise of 29%.
One of his recent outperformers is GE Vernova Inc. (GEV) – and it happens to be one of the AI-adjacent names Luke is excited about right now due to the Summer of AI.
You see, GE Vernova provides the energy infrastructure – turbines, grid technology, and power systems – that keeps data centers connected and humming. As AI demand grows, so does demand for what GEV makes.
Here’s Louis with how this demand has impacted GEV’s earnings:
First-quarter earnings surged 1,700% year-over-year to $4.75 billion, or $17.44 per share.
Adjusted earnings came in at $1.98 per share, beating estimates of $1.67 per share by 18.6%.
That’s not a mild beat. That’s the kind of number that gets institutional attention fast.
Growth Investor subscribers who followed Louis into GEV last August are sitting on 77% gains as I write. But if you’re not in GEV, you’re not too late.
Louis’ current Buy Below price is $1,288, about 2% higher than where GEV trades as I write on Wednesday. So, if you’re looking for a stock to ride during this Summer of AI, you still have room to get in.
One more thing from Louis before we move on…
Yesterday, this came across my desk from him, related to this earnings season:
With earnings coming in stronger than expected, it’s easy to follow the temptation to sit back and watch the profits roll in.
I think that’s a mistake. Because you should always be on the lookout for what’s next.
Right now, companies are spending billions to build out AI – data centers, power infrastructure, computing systems and more.
But according to my research, the next phase in the AI boom is happening in a little-known lab in Tennessee.
Hardly anyone is talking about it. But President Trump even compared the size and scope of this project to the Manhattan Project.
It’s an interesting story, but I don’t want to go down that rabbit hole in this Digest. However, you can get the full scoop from Louis in his interview right here.
Stepping back, are you nervous about owning Tech/AI after the historic run since late March?
It’s a fair question.
As we just saw, XLK has exploded 32% off its late-March lows in a matter of weeks. That kind of move has a way of making even seasoned investors feel like they’ve missed the easy money – or worse, that they’re holding the bag at the top.
But before you second-guess your AI positions, consider this…
AI and Tech have something most of the market doesn’t: unusual earnings visibility backed by public, multi-year capital commitments.
Just last week, the hyperscalers reported earnings and, almost to a company, accelerated their AI infrastructure spending guidance.
The collective annual CapEx for these four companies is now projected to approach $700 billion in 2026.
Meanwhile, several explicitly signaled that CapEx will continue to increase into 2027. In fact, CNBC reports that the combined AI buildout spend for Microsoft (MSFT), Alphabet, Amazon, and Meta is projected to cross the $1 trillion milestone in 2027.
That spending is poised to flow directly into the earnings of the companies supplying the buildout…
The chip designers, the power providers, the data center operators, the software platforms.
And crucially, it doesn’t depend on whether an exhausted consumer decides to splurge at Starbucks or buy a new car. The hyperscalers have publicly committed to their shareholders.
That’s a more insulated growth engine than most of the market can claim right now – and it’s an insulation that doesn’t extend beyond the AI ecosystem.
Non-AI stocks aren’t necessarily headed for a crash. But they don’t have this same structural earnings visibility. They’re exposed to consumer demand, interest rates, and slowing global demand. The risks are more traditional, and the upside is more limited.
Which brings us full circle to where we started today…
“Fantastic…but with a caveat.”
The “fantastic” is real: 27.1% earnings growth, blowing past forecasts, achieved in the middle of a war, a paralyzed Fed and a squeezed consumer. That’s not noise. That’s real strength.
But the caveat is equally real…
Strip out Tech and AI, and you’re looking at roughly 5% growth. Fine – but not the stuff that will accelerate your retirement.
So, the playbook is straightforward. Stay long Tech and AI with confidence – whether you’re doing it on your own, or with the help of Louis, or the guidance of Luke – the data, the earnings, and a trillion dollars in committed hyperscaler CapEx all support it. For the rest of the market, be more selective and cautious.
As always, know what you own, why, and when you’ll sell. But with those safeguards in place, enjoy this “Summer of AI.”
Have a good evening,
Jeff Remsburg
(Disclaimer: I own AMD, GOOGL, MSFT, and AMZN.)
