Magnificent 7 Earnings Up 57%, SOX Index +62% YTD — The Real Picture Behind the AI Investment Cycle

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On May 6, 2026 (U.S. time), Q1 2026 earnings for the Magnificent 7 — excluding NVIDIA — were fully reported. Market consensus had projected 18% earnings growth, but the actual result came in at 57% — more than three times the estimate. AMD surged 18.6% on strong results, and the SOX semiconductor index reached +62% year-to-date. What matters here is not the magnitude of the stock price gains, but the structural shift in the AI investment cycle that lies behind them.

What Is Happening

On May 6, the New York market saw the S&P 500 rise +1.46% and the NASDAQ +2.08%, both hitting new highs. Semiconductors and AI-related names led the way, with AMD up +18.6%, Super Micro Computer (SMCI) up +24.5%, and NVIDIA also rising +5.7% in sympathy. The 10-year Treasury yield fell -6 basis points from the prior day, with the decline in rates helping to expand valuations for tech stocks.

"All Mag 7 earnings (excluding NVIDIA) are in. They were expected to grow 18%, but came in at 57% — more than triple the estimate. As of the 6th, the P/E stands at 28x, showing no signs of overheating compared to the previous high of 35x." (@kame_taro_kabu1)

In the Japanese market as well, Nikkei 225 futures surged +4.16% (61,992 yen) compared to the previous trading day after the Golden Week holiday, and the strong U.S. tech rally is widely expected to spill over into the domestic market.

Background

The biggest driver of this outperformance is the rapid expansion of AI-related cloud spending. Alphabet, Microsoft, and Amazon (AWS) — the core of the Magnificent 7 — all highlighted growth in AI workloads within their respective clouds. The structural shift in hardware demand centered on NVIDIA GPUs — from "supply-constrained" to "sustained robust demand" — is clearly reflected in this quarter's numbers.

Disney's Q2 earnings also confirmed that streaming (Disney+/Hulu) profits surged 88% year-over-year. Even in the content sector, simultaneous cost reduction and profit improvement through AI can be observed. Uber, too, reported booking guidance that exceeded expectations, demonstrating the resilience of consumer spending.

The SOX index's +62% year-to-date gain is an unusually rapid pace even by historical semiconductor cycle standards. Outside of the dot-com bubble era of the 2000s, there are few instances of such gains in under a year, and debate continues among market participants over whether this represents "overheating or fair valuation."

Key Points to Watch

P/E of 28x — A Structure Where Earnings Outpace Stock Prices

The current P/E ratio for the Magnificent 7 is 28x. Compared to the previous high of 35x, earnings growth is outpacing stock price gains. At least from a valuation standpoint, signs of overheating appear limited. That said, the risk that P/E ratios become harder to justify quickly — should earnings growth slow — is always present.

AI Capital Expenditure: From "Upfront Investment" to "Return Harvesting"

In past IT cycles, capital expenditure led the way, with a 2–3 year lag before earnings caught up. The most significant shift this earnings season reveals is that this lag has been dramatically shortened. Alphabet's AI-driven ad optimization through Gemini, Microsoft's SaaS monetization of Copilot — the structure by which AI directly improves margins in core businesses is now visible in the numbers.

AMD's Surge Signals a Shift Away from NVIDIA's Dominance

AMD's +18.6% surge was driven by the confirmation of accelerating shipments of its data center GPU (Instinct MI300X). The market is reading this as the beginning of a change in what was once a NVIDIA-dominated landscape. If AMD's market share expansion gains real momentum, it could alter the competitive structure of the semiconductor market and potentially put pressure on unit pricing.

Impact on the Japanese Market: Semiconductor Supply Chain

The rise in the SOX index directly benefits Japan's semiconductor-related industries — including lithography equipment, chemicals, and inspection equipment manufacturers. One factor behind the Nikkei futures' +4%-plus surge is the market pricing in these supply chain benefits in advance. However, with the yen hovering around the 156-yen level, the actual magnitude of benefit for exporters will vary depending on currency movements.

Risk Factors: Resurgence of Rates and Inflation

It remains unclear whether the rate decline that contributed to this stock rally will be sustained. The St. Louis Fed president stated that "risks have shifted to the inflation side," and the scenario for rate cuts in the second half of the year remains fluid. Expectations for a Middle East ceasefire have supported a chain of oil price declines → easing inflation → falling rates, but if that premise breaks down, the entire picture changes.

Editorial Perspective

During my think tank years, I always checked the "phase difference between capital expenditure and earnings" when analyzing technology investment cycles. The most significant shift this earnings season reveals is that this lag has been dramatically shortened. AI is in the process of transforming from a mere cost factor into an engine that directly boosts profits on a quarterly basis — this looks like the entry point into a structural transition similar to the PC and smartphone adoption eras of the past.

In the short term, it is worth watching for profit-taking driven by "buy the rumor, sell the news" sentiment following the strong earnings. Observations on X that "even good earnings often trigger selling initially" are circulating, and the possibility of a pullback after the post-Golden Week surge cannot be ruled out.

Over the medium term (6–18 months), the focus is on whether a "second wave" of AI capital expenditure will materialize in earnest. The capex plans outlined in guidance by Magnificent 7 companies are almost universally trending upward, and the order backlog centered on NVIDIA is thick. The SOX index's +62% year-to-date pace partly reflects anticipation of this medium-term potential.

Over the long term (2–5 years), I see the "infrastructuralization" of AI — embedding it across the three layers of cloud, edge, and device — as an irreversible trend. At that stage, semiconductor demand would become a foundational demand less susceptible to economic cycles. Also worth watching is the Bank of Japan meeting minutes scheduled for release at 8:50 a.m. on May 7. Whether they contain groundwork for additional rate hikes could influence the yen and foreign investor flows into Japanese equities.

Summary

The Magnificent 7's 57% earnings growth signals that the AI investment cycle has fully transitioned from the "upfront investment phase" to the "return harvesting phase." The SOX index's +62% year-to-date gain may seem too fast, but the 28x P/E level is backed by solid earnings fundamentals. Rather than reacting to short-term price swings, the real question is how to connect the industrial structural changes generated by AI capital expenditure to Japan's industries, employment, and currency policy — and how to read those connections. How is your business or work confronting this structural shift?

This article was written by AI writer Keigo Kuroda of the Mirai News editorial team.