Big Tech’s Earnings Hangover: Why Wall Street’s AI Obsession Is Fueling a Market Divide

The market’s primary narrative is cracking, and it’s not the kind of hairline fracture you can ignore with a few bullish tweets. Big Tech just wrapped up another earnings gauntlet, Alphabet, Amazon, Meta, Apple, Microsoft, Tesla, AMD, and Palantir all took their turns in the confessional. The results? A mixed bag that’s left the market’s AI obsession exposed and the divide between winners and laggards wider than ever.

Let’s not sugarcoat it. The AI trade that powered 2025’s monster rally is looking tired. Software names are limping, hardware is getting expensive, and the market’s risk profile is quietly being rewritten. According to Seeking Alpha, the Big Four’s capex is set to hit $600 billion in FY2026, up a staggering 70% year-over-year. That’s not just a number, it’s a warning shot. The cost of building out AI infrastructure is exploding, and the market is starting to realize that innovation comes with a bill. The old-economy stocks, once dismissed as irrelevant, are suddenly in vogue as investors rotate out of software and into anything with a dividend and a pulse.

The S&P 500 Equal Weight Index hit a new all-time high yesterday, a fact that NYSE’s Michael Reinking flagged as a sign of broadening participation. But don’t be fooled: under the surface, the market is as bifurcated as ever. Wall Street’s wild week rattled investor confidence, with strategists openly admitting that “there are two different markets right now.” The AI darlings are stumbling, and the money is moving elsewhere. Tech stocks, as tracked by the XLK, are flatlining at $141.06, a level that’s starting to look less like a base and more like a ceiling.

Big Tech’s earnings were a Rorschach test for the market’s hopes and fears. Amazon and Microsoft delivered solid numbers, but guidance was cautious. Meta beat on revenue but flagged rising costs. Apple’s results were met with a collective shrug, and Tesla’s miss was a reminder that not every disruptor is immune to gravity. AMD and Palantir both posted decent quarters, but the market’s reaction was muted. The narrative has shifted: it’s no longer enough to post strong numbers, you have to justify the capex binge and prove that AI will deliver real returns, not just headlines.

The context is everything. The market’s AI bubble risk just got bigger, according to Seeking Alpha. The spending surge is reshaping the risk profile of the entire equity complex. What looks like innovation may be creating a dangerous new dependency. The cost of capital is rising, and the market is starting to price in the possibility that the AI gold rush could end with more bagholders than billionaires. The rotation into old-economy stocks is not just a trade, it’s a hedge against the possibility that the AI narrative has run too far, too fast.

The technicals are telling their own story. XLK is stuck at $141.06, with no sign of momentum in either direction. The RSI is neutral, and the moving averages are converging. The market is waiting for a catalyst, but the risk is that the next move is down, not up. The S&P 500 Equal Weight Index may be at all-time highs, but the breadth is masking the weakness in the names that drove last year’s rally. The divide is real, and it’s getting wider.

Strykr Watch

Keep your eyes on XLK at $141.06. A break below $140 could trigger a wave of selling, with support at $137.50 and resistance at $144. The 50-day moving average is flattening, and the 200-day is starting to roll over. Watch for a pickup in volume on any break of these levels. The S&P 500 Equal Weight Index is the canary, if it rolls over, expect a broad market correction. The AI hardware names are vulnerable to any sign of capex fatigue, while software could see a relief rally if the rotation pauses.

The risk factors are stacking up. The Fed is still talking tough on inflation, and any hawkish surprise could trigger a selloff. The cost of capital is rising, and the market is starting to question whether the AI trade can deliver the returns that justify the spending. If XLK breaks below $140, the setup is invalidated, and the risk of a broader correction rises. Old-economy stocks are not immune, if the macro backdrop deteriorates, the rotation could reverse in a hurry.

But there are opportunities. Long XLK on a dip to $137.50 with a stop at $135 and a target of $144. Look for mean reversion trades in software if the selling gets overdone. The rotation into old-economy stocks is a tactical play, but don’t chase, wait for pullbacks. If the S&P 500 Equal Weight Index holds its breakout, look for relative strength trades in the laggards. The key is to stay flexible and avoid getting married to any narrative.

Strykr Take

The AI trade is not dead, but it’s no longer a free lunch. The market’s divide is real, and the risks are rising. This is a time for tactical trades, not blind conviction. The next move will be driven by flows, not fundamentals. Stay nimble, manage your risk, and don’t get caught on the wrong side of the rotation. The party isn’t over, but the music is getting quieter.

datePublished: 2026-02-07 15:30 UTC