Tech companies are delivering on earnings.

North American stock markets fell on Tuesday as the fourth-quarter earnings season comes to an end, with Nvidia as the last giant name remaining to report, potentially pushing markets higher or disappointing on the AI hype. The S&P 500 and Nasdaq are up 4.3% and 4.1% in 2024, respectively, while Canada’s main benchmark is only up 1.2%.

The US markets are on edge to see whether Nvidia, as the vanguard of the whole artificial intelligence move, will again deliver on earnings to justify the lofty multiples or if the AI move will be shown to be overhyped.

The earnings season so far has reaffirmed that US firms are delivering and the multiples are, in fact, justifiable. The price-to-earnings ratio of around 30 is not comparable to what was recorded during the 90s tech bubble when the tech sector recorded P/E ratios of over 100.

In fact, before the earnings season started, the Magnificent 7 were forecasted to see a 30% increase in earnings, whereas after earnings, the figure was even higher at 34%, while the rest of the S&P 500 saw almost flat earnings growth.

The overall growth of the US markets is coming from the big tech names, while the rest of the sectors are either just delivering in line with expectations or without significant earnings growth rates.

With the hard recession scenario out of the picture, if interest rates start to come down, we can expect other sectors to see better growth in 2024 and overall positive gains for stock investors.