Apple and Palantir investors discover: fear of overvaluation outweighs excellent results

Earnings season on Wall Street reveals a shift from AI enthusiasm to a profitability test: Apple suffers from margin erosion and slowing services growth, Palantir shows growth but a slowdown in backlog, and chip stocks are hit by fears of cloud giants cutting capital expenditures.

Earnings season on Wall Street is raising questions about how the market views the artificial intelligence revolution. While in the past mentioning AI was enough to send stocks soaring, the market is now moving to the testing phase: how much return is there on the investment and whether there is economic feasibility and profitability. Apple recorded a 21% increase in sales in China and 28% for the full year, but gross profit margins are expected to decline to 45%-46% compared to 47.9% in the previous quarter, and services division growth is expected to slow to 8%-9%. Palantir posted a 96% jump in revenue to $2.31 billion, but investors identified a slowdown in backlog: 212 deals worth $2.9 billion compared to 220 deals worth $3.4 billion in the previous quarter. Chip stocks, including Nvidia which lost about 15% in the past month, are suffering from fears that cloud giants will cut capital expenditures in 2027. The article cites analysts warning of overvaluation and a shift of funds to software companies.