Prediction: Oct. 29 Will Be an Enormous Day for the Stock Market

The S&P 500 has delivered a mixed bag of gains and losses to investors in recent months, and much of this has to do with artificial intelligence (AI) stocks. Investors rushed to get in on AI stocks early in the boom due to the technology's game-changing potential. As a result, these players led major indexes higher and, generally, have continued to do so. For example, the S&P 500 is heading for an 11% increase this year.

At the same time, though, some investors have worried about the huge levels of investment that tech companies are pouring into the AI infrastructure build-out. Amazon, Alphabet (NASDAQ:GOOG) (NASDAQ:GOOGL), Microsoft (NASDAQ:MSFT), and Meta Platforms together aim to spend more than $700 billion on the effort this year -- and the message is that these heavy investments will continue beyond 2026. Investors, questioning whether this spending will pay off, have turned away from AI stocks on occasion, and that's resulted in ups and downs for the market in recent months.

But on Oct. 28, after the market closes, clues about what's next may emerge. Considering all of this, my prediction is Oct. 29 will be an enormous day for the stock market. Let's take a closer look.

Image source: Getty Images.

AI as a catalyst for stock performance

First, though, a quick recap of what's happened so far. As mentioned, AI has been the catalyst for positive and negative stock performance in recent years. In the earliest stages of the AI revolution, over the past few years, the trend was mainly positive. The training of AI models led to growing revenue for chip designers, cloud companies, and other equipment makers -- and investors jumped to get in on these stocks.

High demand for AI products and services, though, means that today, tech giants must invest billions of dollars to keep up and potentially serve future demand. Investors like the idea of explosive revenue growth on the horizon, but they question whether the levels of investment we're seeing now are truly necessary. If tech giants can't fully monetize the spending, earnings and stock performance could suffer down the road. This concern, along with general market headwinds like worries about rising inflation, has weighed on demand for AI stocks and even other growth stocks.

What's happening on Oct. 28

Now, let's consider what's coming up on Oct. 28 that could lead to a big day for the stock market. Two "Magnificent Seven" giants, Alphabet and Microsoft, are scheduled to report earnings after the market closes. As I noted above, they are among the key players in the infrastructure build-out story. Investors will closely watch the companies' comments on capital spending in the quarter and forecasts for the next quarter. They will also look for trends in demand and whether the AI investments continue to offer a significant boost to revenue.

Information on these points could set the tone for trading on Oct. 29. Amazon, another infrastructure giant, will report earnings on that day after the market closes, potentially offering direction for the market through the end of the week.

Meta was the first of the "Magnificent Seven" to release earnings, and though the report was positive, the stock slid amid concerns about the company's ongoing heavy AI spending. I would expect its "Magnificent Seven" peers to also express commitment to the infrastructure investment. But cloud players such as Alphabet, Microsoft, and Amazon have more quickly generated revenue gains from AI than Meta has, so investors may react differently to their comments on spending.

Now, you may be wondering what you as an investor should do ahead of these reports. Though the latest earnings reports and forecasts for the upcoming quarter are important, it's key to focus on the long-term picture. And so far, the long-term AI story remains bright. This means that it's a great idea to buy quality AI stocks -- before or after Oct. 29 -- at reasonable valuations and hold on as this tech revolution unfolds.

Adria Cimino has positions in Amazon. The Motley Fool has positions in and recommends Alphabet, Amazon, Meta Platforms, and Microsoft. The Motley Fool has a disclosure policy.