Big Tech Stocks Are Still Delivering Huge Earnings Growth

Commentary

Last Wednesday, Micron Technology (MU) announced stunning 379% revenue growth and 1,061.5% earnings growth (to $37.7 billion), significantly above analyst consensus estimates. Micron also raised its revenue and earnings guidance. Sanjay Mehrotra, Micron Chairman and CEO, said, “Micron delivered record fiscal 2026 results, and we expect an even stronger 2027.”

Also last week, Nvidia (NVDA) announced a $150 billion share buyback, an all-time record by one company. (The previous record was a $110 billion share buyback by Apple in 2024.) To date, Nvidia has not completed its previously authorized share buyback, so it can now buy up to $235 billion of outstanding shares.

As with any multi-trillion-dollar company, the law of big numbers could slow down a stock’s potential appreciation, so these massive stock buyback announcements are a positive development, reducing the outstanding shares and lowering its P/E ratio. Nvidia currently trades at 24.6 times forecasted fiscal 2028 earnings, while Apple trades at 38.5 times forecasted earnings, so I still see Nvidia at $300 by year-end.

FactSet is estimating that the overall S&P 500’s third-quarter earnings are forecasted to rise 29.1%, so the upcoming announcement season should be very exciting. Add in a normal volume of earnings surprises, and the S&P 500’s earnings should be up over 33%.

Here are the most important developments recently and what they mean:

– The euro is at a 17-month low versus the U.S. dollar, and major countries within the EU are struggling. Spain was one of the economic bright spots, due partially to a big population increase from immigrants, but its retail sales dropped 0.9% in July, and economic warning signs have emerged. Of course, the biggest drop in July retail sales was a 3.4% plunge in Germany, so it was no surprise that the AfD Party won three regional elections. So, expect the euro to remain weak while economic and political chaos persists.

– Former ECB Executive Board member Lorenzo Bini Smaghi said the ECB should halt its quantitative tightening to remove a source of financial market uncertainty. Specifically, Smaghi said, “The shadows of the 2011-12 crisis are emerging again” and added, “One of the clearest signs is the widening of spreads between the government bonds of core and peripheral countries, with France being treated by markets as part of the periphery.” Smaghi is Italian and left the ECB in 2011. He served as Chair of the French bank Societe Generale until May and now works for Lazard. I find it interesting that the former Chair of a massive French bank is calling France a “periphery” of the EU.

– I want to point out how strong the U.S. dollar is now compared to the British pound and other currencies, which is actually deflationary, since a strong U.S. dollar lowers the cost of commodities and imported goods. In my opinion, the British pound is leading the European currency collapse. This is due to the fact that the Bank of England did not raise key interest rates like the Fed and the European Central Bank (ECB) and is now considering measures to improve gilt (British government debt) repo market resilience and manage “risks both from the increase in market leverage already seen over the past 18 months.” Complicating matters further is British Prime Minster Andy Burnham is now making overtures for the United Kingdom to rejoin the European Union (EU) since their budget woes persist.

– The fourth quarter is seasonally the strongest quarter, and November is the second strongest month. This November we will have a second Russell re-alignment, so the stocks that get added to the Russell 2000 and 1000 indices are expected to surge from institutional buying pressure, just like Bloom Energy (BE) soared after being added to the S&P 500 last month.

– I am fully expecting that we will have an “early January effect” in November that will set the stage for a potentially even stronger January effect in the New Year. I should add that since 2027 is the third year of a Presidential election, which is the best performing year for the S&P 500 during the Presidential election cycle, investor optimism is rising.

– One other thing that investors will notice is that after the mid-term elections, all the bickering about data centers and high energy prices will diminish. The data center narrative was seeded by Chinese bots striving to plant false stories that some naïve politicians picked up. These false stories were designed to hinder America, since the U.S. is winning the AI race and China is a distant second.

Overall, a series of events has converged to propel fundamentally superior stocks higher, like quarter-end window dressing, seasonal strength, the anticipation of stunning third-quarter announcements, positive analyst earnings revisions, accelerating GDP growth, a strong U.S. dollar, and finally confirmation from multiple Fed officials that the FOMC will not hike key interest rates at its October meeting. So as investors, we can choose to embrace the positive news and prosper or get caught up in negative propaganda that is expected to disappear after the mid-term elections.