Global Earnings Growth: Broadening Beyond Technology
Corporate earnings expectations are strengthening — and not just at the margins. Compared with the already constructive outlook from recent quarters, the direction of travel is clearly upward across the next two years. What's notable is wherethe momentum is coming from: increasingly, it's from beyond US large-cap growth and the Magnificent Seven.
Earnings growth is running measurably ahead of the recent historical pace, and crucially, it's broadening. The most pronounced improvement in forward earnings expectations — relative to trailing actuals — is visible in small-cap, value, and emerging market equities. US growth stocks and the Magnificent Seven, while still solid, are seeing comparatively more modest revisions. The gap between forecast EPS growth for the next 12 months and actual EPS growth for the prior 12 months is widening across both US and emerging market equities — a meaningful signal of shifting dynamics.
The AI Buildout Is the Engine
At the heart of this broader earnings momentum is the AI capital expenditure cycle. Hyperscalers — the major technology companies building and operating large-scale, AI-optimised cloud infrastructure — are estimated to deploy approximately US$800 billion in AI-related capital spending this year alone. That spending is already flowing through to earnings beats across the global AI infrastructure supply chain, encompassing lithography, foundry, memory, and storage within semiconductor manufacturing.
Increasingly, market attention is concentrating on what has emerged as the critical bottleneck: high-bandwidth memory chips. These are essential for inference-heavy workloads and AI agents, where latency — the delay between an AI input and its output — is a competitive differentiator. The focus on high-bandwidth memory is translating into exceptional earnings growth and rising expectations for companies including Micron Technology and SanDisk in the US, and SK Hynix and Samsung in Korea, alongside strong price performance.
The Ripple Effects Are Wide
The impact of AI investment is not confined to semiconductors. The physical demands of building, powering, and cooling data centres are generating meaningful earnings tailwinds across energy, utilities, industrials, and materials. And the second-order effects are still unfolding: as AI diffuses more broadly through the economy, productivity gains should begin to lift earnings and margins well beyond the immediate infrastructure ecosystem.
The Questions That Will Shape What Comes Next
How this plays out will hinge on three key issues:
Will AI infrastructure spending continue to strengthen, sustaining earnings momentum in semiconductors and Korea- and Taiwan-linked equities?
How effectively will the major hyperscalers — Amazon, Alphabet, Meta, and Microsoft — monetise their substantial AI investment?
Will early indications of AI adoption begin to materially lift earnings and margins across the broader economy?
These are not peripheral questions. They are the variables most likely to define the earnings growth profile of global equity markets over the medium term — markets that have already been fundamentally shaped by AI, and will continue to be.
Rick Maggi CFP, Financial Advisor Perth, Westmount Financial
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