Stock Market Insights: From tariffs to tech, what’s fueling this earnings season
- Dr. Richard Baker
- Aug 7
- 3 min read
Dr. Richard Baker, AIF®, is the CEO and executive wealth advisor at Fervent Wealth Management.
One of my favorite county fair rides was the Zero Gravity, which uses centrifugal force to pin you to the wall you were leaning on while it spins crazily. Everyone who rode it felt topsy-turvy walking away. I can’t think of a better description of what corporate leaders seem to be describing, having survived a topsy-turvy quarter filled with tariff drama.
As of July 25, 2025, slightly over a third of S&P 500 companies have reported earnings for the second quarter, and so far, the results are good enough. Over 82% of companies are beating their earnings expectations. Energy and financials have produced the biggest surprise earnings so far at 14% and 10%, respectively. The communication services (boosted by big numbers from Warner Bros. Discovery) and technology sectors had the fastest earnings growth at 33% and 16% respectively.
While the numbers are encouraging, investors are primarily focused on forward-looking guidance from company leadership to measure their ability to navigate the next few months. Strong earnings in a quarter will only go so far if forward guidance shows cracks in their business model.
So far, the earnings calls have had two themes: 1) tariffs/trade policy 2) artificial intelligence (AI) spending.
1. Tariffs/trade policy
There is an improvement in tariff clarity, as the White House and the European Union (EU) reached a trade accord featuring 15% tariffs on EU goods, including automobiles. The last big countries to finalize tariffs are China and Canada/Mexico. The longer those countries wait to work out an agreement, the less leverage they have with the Trump administration. The majority of earnings call discussions on trade and tariffs have been better than anticipated. U.S. companies are finding a way to manage through uncertainty, and most, like PulteGroup’s CEO, Ryan Marshall, are saying the tariff effects are “going to be minimal and mostly in the back half of Q4.”
2. Enormous AI spending
Investors continue to track investments in AI infrastructure, including who's making money on it, and who is using it to become more efficient to increase profitability. Alphabet Inc. (Google) was the first mega-cap tech company to report earnings, and they raised their full-year projection of spending on AI infrastructure by $10 billion, saying they will spend $85 billion on AI. A positive sign is that Google’s press release stated that AI is having a positive impact on every part of their business. Alphabet, Amazon, Meta and Microsoft are expected to spend nearly $300 billion combined gearing up on AI and even more in the following years, according to JPMorgan. The biggest beneficiaries of the AI spending continue to be manufacturers of datacenter electrical equipment, power generation equipment and semiconductor equipment. It is too early to tell, but I’m looking forward to seeing which companies use AI to become more efficient and increase profitability.
Summary
Here are some key takeaways from this earnings season. First, trade policy and tariffs are being managed as well as could be hoped, and U.S. companies are doing a good job working to lessen the impact on their earnings. Secondly, the great AI spending splurge appears to be in its early stages and will likely continue to be an investment theme to watch.
I have fond memories of sitting on the curb next to the Zero Gravity ride, waiting for the dizziness to fade. I’m too old to ride it now, but sometimes I feel the stock market gives me similar dizziness.
Have a blessed week!
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Opinions voiced above are for general information only and not intended as specific advice or recommendations for any person. All performance cited is historical and is no guarantee of future results. All indices are unmanaged and cannot be invested in directly.
The economic forecast outlined in this material may not develop as predicted and there can be no guarantee that the strategies promoted will be successful.
Fervent Wealth Management is a financial management and services entity in Springfield, Missouri.
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