Happy Monday!
Once every quarter, the market's mega AI rally faces its biggest moment of truth: Nvidia's earnings. On Wednesday, after markets close, the chip maker, whose products are at the center of generative AI and data-center demand, will release its fiscal fourth-quarter and full-year results
A key thing to watch will be how the AI behemoth's revenue numbers compare to expectations near $65 billion. Also, Nvidia's earnings report could determine whether the AI narrative stays strong or gives in to the rotation themes.
Well, just as we're thinking things are settled, tariffs are back in conversation. In a blow to the current administration, on Friday, the U.S. Supreme Court ruled that the broad tariffs implemented last year are illegal.
A defiant Trump administration, however, continued discussion of higher global levies. This means tariff uncertainty is still on.
On the economic front, the latest numbers from the Bureau of Economic Analysis show the U.S. GDP grew at just a 1.4% annualized rate in the fourth quarter of 2025. It's lower than expectations and quite disappointing compared to the previous quarter's 4.4% growth.
Talking about the market moves, the Nasdaq Composite finished roughly 1.5% higher for the week, snapping a five-week losing run. The S&P 500 went up about 0.7%, and the Dow added near 0.5%, extending a modest rebound after a difficult phase.
So far in 2026, the market looks less concentrated than last year. Compared to last year, big tech and communication services are no longer the leaders. Investors are rotating into energy, industrials, health care, and defensives.
The Deep Dive
This week, we focus on four stories shaping market sentiment:
- Nvidia's earnings could decide the next move for AI stocks
- S&P 500 posts strongest revenue growth in years: FactSet
- Market rotation broadens beyond tech leadership
- Six stocks at the forefront of the rotation
Let's take a closer look…
1. Nvidia's earnings could decide the next move for AI stocks
According to FactSet estimates, Nvidia is expected to post adjusted earnings of $1.52 a share on roughly $65.7 billion in fiscal Q4 revenue. But there is more to watch than just the headline numbers.
The real focus will be on data center revenue, where demand from cloud providers and enterprise customers has driven most of Nvidia's recent growth.
Plus, investors will closely listen to signals on the company's pricing power and order visibility. Over the past year, Nvidia has benefited from tight supply and premium pricing on its most advanced AI chips.
Also, commentary on AI infrastructure spending, capacity expansion, and customer demand into 2026 will mold expectations across the broader semiconductor and software ecosystem. Updates on Nvidia's China exposure will matter too, after U.S. export restrictions limited chip sales there for much of 2025.
2. S&P 500 reporting highest revenue growth in 3 years: FactSet
As the ongoing earnings season enters its final lap, top-line growth across the S&P 500 continues to improve. According to data from FactSet, the index's blended year-over-year revenue growth rate for the fourth quarter is 9.0%.
If this happens to be the case for the remaining reports, it would mark the strongest revenue growth since Q3 2022, when the index posted an 11.0% revenue growth.
Revenue strength is also broad-based, as ten of the eleven sectors are reporting higher revenues compared to last year. Three sectors are delivering double-digit growth, led by Information Technology, Communication Services, and Health Care.
It's interesting to see how expectations have consistently gone up with every earnings season. At the end of September, estimated Q4 revenue growth was 6.5%. By the end of December, that estimate had risen to 7.8%. With most results now in, the blended figure has climbed to 9.0%.
3. Market rotation broadens beyond tech leadership
Looking at YTD growth numbers, sectors like basic materials, energy, consumer defensive, and industrials are leading the market this year. Also, last year's key drivers, like big tech and communication services, are visibly lagging in 2026.
Data from Yahoo Finance shows that basic materials (+20.65%), energy (+18.32%), and consumer defensive (+15.08%) are the top three winners this year, while technology, financial services, consumer cyclical, and communication services have clocked negative growth so far in 2026:
4. Six stocks at the forefront of the rotation: Morningstar
With rotation out of tech, Morningstar identified six stocks driving much of the market's gains in 2026.
In industrials, Caterpillar (+31.6%) and GE Vernova (+25.2%) have contributed the most in the sector.
Note that Caterpillar has been a key beneficiary of AI infrastructure buildouts through equipment used to power data centers. And GE Vernova has gained on improving demand for power generation and grid upgrades.
Walmart (+13.7%) and Costco (+15.7%) are driving growth in consumer defensives.
Energy has been one of the strongest sectors in 2026, up nearly 20%, with Exxon Mobil (+26.1%) and Chevron (+21.8%) accounting for a large share of the gains.
Higher oil prices and improved capital discipline are helping these companies outperform.
Before we sign-off
Markets move not just on data, but on how investors interpret them. In each of the stories we cover, it all comes down to market expectations and sentiment. When sentiment runs ahead of fundamentals, what follows is volatility.
At AlphaPro, we track the voice behind the numbers and tone of earnings calls, policy speeches, and analyst commentary. Our Earnings Sentiment Score helps you cut through the noise and see how executives and policymakers are shaping narratives in real time.
Same time next week? See you then.
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