Nvidia and Micron Make Up 34% of America's Earnings Boom

Wall Street expects S&P 500 companies’ third-quarter earnings to rise about 30% from a year earlier, but the expansion is unusually concentrated: Nvidia and Micron alone are projected to supply 34% of the increase, while 10 companies account for roughly two-thirds. AI-related chip demand has delivered exceptional profits and pricing power - Micron’s latest quarterly profit was up 1,078%, and analysts forecast 90% growth for Nvidia. Broadcom and Meta also contribute, alongside energy companies benefiting from higher prices linked to conflict in Iran. The concentration reflects investors’ reliance on the costly race to build AI infrastructure and on expectations that demand for AI tools will eventually generate substantial returns.

The dependence creates vulnerability if AI fails to justify the enormous investment, or if financing and data-center construction falter; doubts of that kind helped spark a sharp Nasdaq selloff after Meta outlined plans to raise cash. Yet some investors see reasons not to panic: earnings are still expected to grow 10% even without the 10 largest contributors, and the remaining companies are considered to be supporting the market’s performance. Share prices have also risen less than earnings estimates, suggesting valuations have not reached euphoric levels. Some managers are preparing for slower chip-driven growth by shifting toward electricity providers, which may benefit from data-center power demand. The comparison with the dot-com boom persists, but proponents argue today’s leading technology companies are already producing substantial profits.