Analyst: AI Sector Earnings 'Very Good'
Analyst Geoffrey Dennis says that earnings growth is "very good across the AI sector," indicating a shift from hype to real financial performance. He notes that robust fundamentals are appearing not just in tech giants but also among second-tier and specialized AI firms, suggesting broad-based sector momentum.
The financial backbone of the AI surge is massive infrastructure spending, with the five largest hyperscale companies expected to invest between $660 billion and $690 billion in 2026, a significant increase from the $380 billion spent the previous year. This capital injection is fueling demand across the entire semiconductor supply chain. Companies manufacturing the foundational hardware for AI are reporting staggering growth. NVIDIA's data center revenue hit a record $62.3 billion in the fourth quarter of 2025, a 75% increase year-over-year. Similarly, Broadcom's AI semiconductor revenues jumped 74% in the same period. The demand extends to component manufacturers, with memory chip prices for one DRAM variety rising 75% from December 2025 to January 2026. This has led analysts to project a more than fivefold increase in earnings per share for memory-maker Micron over two fiscal years. This growth isn't limited to chip designers. Jabil, a company that builds AI server racks and data center infrastructure, forecasts a 35% increase in its AI-related revenue to $12.1 billion in fiscal 2026. Even storage company Seagate is seeing a surge, with analysts anticipating a 61% rise in earnings for the current fiscal year. While the information technology sector is projected to see earnings growth over 30%, this figure drops to high single digits for the S&P 500 when tech is excluded. This highlights the current concentration of AI-driven profits within a narrow group of companies. Looking ahead, some firms are translating AI hype into operational changes. Payments company Block, for instance, raised its 2026 gross profit guidance to $12.2 billion, citing a shift to an "AI-native operating model" as a key driver for improved profitability.
