S&P 500 Edges Higher Amid Mixed Mega-Cap Earnings; Dow Leads Market Indexes Overall

The three major U.S. stock indexes moved higher by midday Thursday, though the gains were uneven. The themes of the day were earnings reports, oil prices, and artificial intelligence (AI).

As usual, right?

• The Dow Jones Industrial Average (DJINDICES: ^DJI) led with a 1.3% advance as of 1:08 p.m. ET, buoyed by a double-digit surge in Caterpillar (NYSE: CAT) shares. The industrial equipment giant posted strong earnings this morning.
• The S&P 500 (SNPINDEX: ^GSPC) added 0.4%, while the tech-heavy Nasdaq-100 eked out a 0.2% gain, largely driven by the same mega-cap earnings reports. Four of the Magnificent 7 companies reported results last night, resulting in two significant price dips, one huge jump, and one modest correction.

^SPX data by YCharts

Key catalysts at midday

Alphabet (NASDAQ: GOOG) (NASDAQ: GOOGL) is up by 9.6% after its Google Cloud division posted 63% revenue growth. At the same time, Alphabet's AI service sales are constrained by limited supplies of electric power and number-crunching hardware -- not by incoming orders. The backlog of unfilled Google Cloud orders is up to $462 billion, nearly doubling from the last quarter.

Meta Platforms (NASDAQ: META) had a rougher evening. The Facebook and Instagram parent plans to spend $135 billion on AI infrastructure this year, up from $127 billion three months ago. Meta beat Wall Street's estimates across the board, but investors backed away from its costly infrastructure spending. The stock is down 9.2% at the moment.

Microsoft (NASDAQ: MSFT) experienced a 5.7% dip based on -- you guessed it -- management's AI spending plans. Amazon (NASDAQ: AMZN) got its mega-spending stock price cut out of the way in February and only dipped 1.2% on Thursday. Yes, both Microsoft and Amazon beat the consensus analyst targets on both the top and bottom lines. That's not always enough when investors are looking for head-turning surprises.

Image source: Getty Images.

Of course, Caterpillar's Dow Jones-moving success also tapped into the AI boom. There's a lot of AI data center construction going on, which means Caterpillar's bulldozers and excavators are in high demand, too.

Nvidia (NASDAQ: NVDA) dropped 4.3% without even reporting earnings. Thanks to the chip designer's dominant share of the index weightings, its milder price drop made a bigger difference than Microsoft's or Meta's earnings-based moves. The pain stemmed directly from Alphabet's earnings, as the Google parent said it's shipping AI accelerators to "a select group of customers." In other words, Nvidia is facing fresh competition.

And I can't analyze index moves without checking up on Iran nowadays. The critical Strait of Hormuz remains blocked. Still, Iranian leaders expect "calm" in the region as the country seeks tighter control of the waterway. As a result, the soaring oil prices are taking a breather today.

What's next?

Thursday's action tells a clear story: investors are done writing blank checks for AI ambitions. Alphabet showed up with receipts of soaring Google Cloud revenues, and the stock got rewarded. Meta brought a long shopping list instead. The stock was punished.

The Magnificent Seven aren't moving in lockstep anymore. That's a healthy change. It means investors are thinking critically about which companies are turning AI hype into AI revenue. This time, Alphabet stepped up as a clear leader.

Anders Bylund has positions in Alphabet, Amazon, and Nvidia. The Motley Fool has positions in and recommends Alphabet, Amazon, Caterpillar, Meta Platforms, Microsoft, and Nvidia. The Motley Fool has a disclosure policy.