The US corporate earnings season gathers steam next week as Alphabet and Intel prepare to offer updates that could influence market-leading AI trading amid higher profit expectations and uncertainty over the Iran war.

The S&P 500 slipped to post a weekly decline on Friday, dragged down by a steep pullback in high-flying semiconductor shares. Still, the benchmark S&P 500 is up nearly 9% in 2026, and down 2% from its record high in early June.

Growing expectations for stronger earnings this year have provided bedrock support to investor enthusiasm for stocks. Now they’re counting on second-quarter earnings season to show that the corporate profit engine is still humming, with S&P 500 earnings projected to rise 26% in the period, according to LSEG IBES data.

“Headlines continue to raise concerns and leave investors scratching their heads as to why the market continues to reach new highs,” said Michael Aaron, chief investment strategist at State Street Investment Management. “And that’s because fundamentals have remained resilient, and earnings have remained.”

Alphabet in focus for AI spending view

Alphabet’s quarterly report on Wednesday will draw Wall Street’s attention. Google parent, the third-largest U.S. company by market value of $4.2 trillion, could push the index as one of the heavyweight “Magnificent Seven” stocks that have lifted U.S. equities for much of a nearly four-year rally.

The company is also an AI “hyperscaler,” spending billions of dollars to build data centers and AI infrastructure. Such AI capital spending is at the heart of this year’s market boom, benefiting semiconductors and other companies from huge spending.

If Alphabet announces “any kind of pullback in terms of the spending they’re predicting around AI, you could see ripple effects across the entire AI ecosystem,” said Kevin Mahon, president and chief investment officer at Hanion & Walsh Asset Management. The results of semiconductor companies Intel and Texas Instruments are of particular importance due to the spectacular rally in chip stocks this year. The Philadelphia SE Semiconductor Index ended Friday trading down in recent weeks, down more than 20% from its late-June record high, confirming that it is in a bear market.

However, the index remains above 60% in 2026; Intel shares are up more than 160%, while Texas Instruments is up 60%.

Soft market reactions to strong reports in the period from foreign firms Samsung Electronics and Taiwan Semiconductor indicate high expectations for the semiconductor industry.

Chip stocks rose broadly as investors questioned whether choppy trading had gone too far. The large collective weighting of sectors in the index means that chips can influence the direction of the share market. Leveraged products tied to the semiconductor space also “amplify both the upside and the downside,” State Street’s Aron said.

Q2 reports begin to flood as the Fed approaches

Elon Musk’s Tesla, another Magnificent Seven company, is also set to post results next week. Other high-profile results include American Express, Philip Morris International and defense contractor RTX, with more than 80 S&P 500 companies expected to report. Major US banks kicked off the reporting season this week, posting higher earnings through fees to advise on mergers and acquisitions and rising trading revenue.

Following the recent escalation of the nearly five-month-old US-Israeli war with Iran, Wall Street still accounts for the day-to-day market swings to developments in the Middle East. Many investors expect the war to be relatively short-lived, but are wary that renewed tensions could raise energy prices to levels reached since the start of the war, fueling fears of inflation.

That’s especially the case ahead of the Federal Reserve’s meeting in late July. Pricing in fed funds futures reflects expectations that the US central bank will raise interest rates in the coming months to reduce inflation that is above the Fed’s 2% annual target. The US Cooler-than-expected data on consumer and producer prices this week calmed some fears the Fed could raise rates at this month’s meeting.

“Macro data painted a picture of a stable economy with some improvement in inflationary pressures,” said Eric Kuby, chief investment officer at North Star Investment Management.