Why strong earnings aren’t saving tech stocks

This has been one of the strangest earnings seasons the market has seen in a long time.

Companies are beating expectations and raising guidance… Yet, their stocks are getting absolutely smoked.

That’s not normal.

When names like AMD (AMD) or Alphabet (GOOG) sell off after reporting solid results, something bigger is going on.

Let’s look at three forces dragging down AI tech trades right now… and where to look instead.

1. Expectations vs. reality

AMD is a good place to start because the reaction made very little sense on the surface.

They beat analyst expectations, raised guidance, and showed continued strength in data center sales.

And the stock still fell over 15%—one of its worst days since October 2022. 

Why? Because the market had already priced in the earnings beat.

Going into earnings, investors weren’t asking whether AMD would deliver solid numbers. They were asking how much upside was left after a big run. When the results confirmed the story rather than expanding on it, there was very little new information for the stock to trade on.

In that situation, even good news can turn into an opportunity to take profits.

Alphabet (GOOG) is another example. As its AI investment ramped, revenue has continued to climb, and free cash flow reached record levels.

But at the same time, the spending numbers are getting enormous. Google expects to spend roughly $175–185 billion on capex next year. For context, that’s double its 2025 capex spending.

That kind of figure forces investors to think differently about timelines. The conversation has shifted toward short-term margin pressure vs. long-term payoff. And markets tend to react quickly when timing gets fuzzy.

2. Overcrowded trades

One of the clearest signals right now is how uneven the reactions have been.

We’re seeing companies beat earnings, raise guidance, report strong cash flow… and still trade lower.

That’s usually a sign investors are unwinding positions rather than reacting to fundamentals. When too many portfolios lean the same way, selling can snowball regardless of how reasonable the numbers look.

Once that process starts, the market moves first and sorts out the details later.

3. A market rotation

This selloff also coincided with a noticeable shift beneath the surface.

Value stocks are outperforming growth stocks by the widest margin in years, as money has begun flowing toward consumer staples, healthcare, and large, established companies with steadier cash flow.

The rotation indicates that the market is reassessing risk, liquidity, and how much it wants to pay for future growth. When that reassessment starts, the most heavily owned growth names usually feel it first.

The quiet winners of the AI buildout

Strip away the headlines, and the AI investment cycle still looks the same.

Spending is rising, data centers are expanding, and infrastructure needs are growing.

All of that requires power.

Every major hyperscaler is increasing AI-related capex, and none can do so without dramatically more electricity. Power generation, grid capacity, cooling, and fuel supply are core constraints.

That’s why areas tied to energy generation, power infrastructure, and grid reliability and cooling have been holding up far better than high-multiple software names.

As AI spending continues, the companies providing the physical inputs quietly become toll collectors on the entire buildout.

The takeaway

It’s important to note that the best tech stocks will still be long-term beneficiaries of the AI growth trend. But for the moment, investors are taking a step back to sort through what the market has already priced in… which trades have become overcrowded… and which still offer clear upside.

That process often looks irrational while it’s happening… But it’s a normal part of how sector leadership shifts, not a signal that the theme itself is dead.

AI is still reshaping businesses. The market is just taking a breath.