S&P 500 companies' third-quarter net profit forecast to rise 30% year-on-year

Nvidia and Micron alone account for 34% of total profit growth

Two-thirds of gains concentrated in top 10 firms, raising concerns about market dependence

Remaining companies still on track for 10% growth; analysts say this is no dot-com bubble

Nvidia CEO Jensen Huang delivers a keynote address at the GTC Berlin 2026 developer conference in Berlin on Wednesday (local time). [Provided by Nvidia]
Nvidia CEO Jensen Huang delivers a keynote address at the GTC Berlin 2026 developer conference in Berlin on Wednesday (local time). [Provided by Nvidia]

Third-quarter net profit for major US listed companies is forecast to jump 30% from a year earlier, but more than a third of the total profit growth is concentrated in just two firms — Nvidia and Micron. As AI chipmakers drive earnings growth across US equity markets, concerns are mounting that the rally has become overly dependent on a handful of large technology stocks.

The Wall Street Journal reported Sunday (local time), citing analysis by financial data firm FactSet and Dow Jones Market Data, that net profit for S&P 500 companies is expected to rise 30% in the third quarter compared with the same period last year.

A closer look at the breakdown, however, reveals a sharp concentration among a small number of companies. Nvidia and Micron together account for 34% of the total increase in net profit. Expanding the scope to the top 10 companies — including Broadcom and Meta — shows that roughly two-thirds of all profit growth originates from that group.

The top 10 are not limited to AI-related technology stocks. Major energy companies such as ExxonMobil and Chevron also make the list, benefiting from higher oil prices driven by the war between the United States and Iran.

AI chipmakers stand out particularly. Micron said last month that its quarterly net profit surged more than tenfold from a year earlier. Market analysts expect Nvidia's net profit to rise roughly 90% over the same period.

The surge in demand for high-performance semiconductors and memory chips, fueled by expanding AI data center investment, is the primary driver of the earnings improvement. Global big-tech companies have poured enormous sums into building AI infrastructure, and analysts say semiconductor suppliers are the direct beneficiaries.

The strong corporate earnings are widely credited as a key reason US equity markets have continued to advance despite headwinds including the US-Iran war and elevated oil prices.

Whether the AI investment boom will translate into sustained profit growth going forward, however, remains a matter of debate. Current share prices reflect not only improved corporate earnings but also expectations that massive AI spending will generate high returns over the long term.

Some analysts warn that if the pace of revenue generation from AI data center construction falls short of expectations relative to the enormous capital being deployed, share prices of related companies could face a correction.

Wall Street investment strategist Ed Yardeni said there is concern that "ultimately we might have to convert all these data centers into pickleball courts." The remark was a metaphor for the risk that overinvestment in AI infrastructure could eventually lead to a shortage of demand.

Others push back against the idea that profit growth concentrated among a few companies is reason enough to turn bearish on the broader US market.

Even excluding the top 10 companies, the remaining S&P 500 firms are forecast to post third-quarter net profit growth of 10% year-on-year — a sign that companies across a range of sectors, not just large AI-related stocks, are sustaining solid earnings momentum.

"The best players are leading the team, but the rest of the roster is pulling their weight too," said Chris Grisanti, chief market strategist at MAI Capital Management.

Analysts also note that valuation pressures from rising share prices have eased since the start of the year. Because corporate earnings have grown faster than share prices, key valuation metrics such as the price-to-earnings ratio have actually declined.

Some observers have drawn comparisons between the current AI-driven market rally and the dot-com bubble of the late 1990s, though many analysts argue the situations are fundamentally different.

Raymond James Chief Investment Officer Larry Adam said that internet companies during the dot-com bubble did not generate the kind of real profits that today's large technology companies do.

The current US market rally, the argument goes, is underpinned not only by expectations of future growth but by actual earnings gains. Still, with expectations for AI investment running high, whether corporate results can meet market forecasts is seen as the key variable that will determine the direction of share prices going forward.


sjy@heraldcorp.com