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US earnings

Date: 20 November 2025

5 minute read

Human hand reaching towards a robot hand

Earlier this week, stock markets tumbled with technology stocks bearing the brunt of the sell-off amid fears the ′AI-bubble′ is about to burst. This market fall followed a BBC interview with Sundar Pichai, the head of Google's parent firm Alphabet, where he said the trillion-dollar AI investment boom has 'elements of irrationality’.

However, Nvidia’s strong results on Wednesday (19 November) helped to calm investors by beating Wall Street forecasts and giving a strong forecast for its future performance.

This week, in the Q Perspective, Sacha Chorley looks at the data behind these headlines and gives an update on the latest US earnings season.

Cooking on medium

Let’s focus on the first of the headlines above, the fear of an AI bubble bursting. A few weeks ago, in a previous blog, my colleague Ian Jensen-Humphreys argued that the recent run-up in AI-related mega-cap stocks is not a classic bubble. Why? Because it has been underpinned by strong growth in delivered earnings, not just hopes for future profits. However, it is worth pointing out that those earnings are themselves driven by speculative investment from elsewhere - think Alphabet and Meta - betting that AI will cut their costs and drive new revenue streams.

Is this really that different from the Dot Com bubble? You could argue the speculation is still there, but it has shifted up the chain from shareholders to corporates. Although the fact there are genuine earnings today is a definite improvement on the late 1990s/early 2000s.

So, while we certainly would not signal the ‘all clear’, the mega-cap rally in the US may have further to run. However, the story is less convincing in US small caps, where the rally has less earnings support and instead has been more of a ′trash rally′ of unprofitable companies. This is something we are more wary of chasing.

Lifting the bonnet

My focus, however, has also been on understanding what these companies are doing under the bonnet. As my colleague, Ian Jensen-Humphreys, mentioned in his recent blog, there remains concern that AI driven stocks are getting into bubble territory. Well, the latest Nvidia earnings underscored how much real business activity is still occurring. In brief, their numbers showed both revenue and earnings growth rates of more than 60% year-on-year – this marked an acceleration versus last quarter – and is being done at a scale that is hard to fathom. To provide some context, Nvidia’s latest quarterly earnings of c. US$57bn is more than the US$46bn that Coca Cola made over the past twelve months!

Brain waves had by hyperscalers, those companies that are leading in the development of cloud computing, might currently be a big driver of these revenues, but equally there is certainly relevance of AI to broader society. During the Nvidia earnings call, the CFO highlighted a wide range of companies using Nvidia chips to implement AI solutions that will improve efficiencies in their businesses, while the CEO expressed his view that the runway for growth remained robust, supported by a new world of chip-hungry agentic AI applications.

However, oven-ready vendor-financing deals and debt financing to facilitate purchases of Nvidia chips remain a concern. The high capex spending seen is now often being explicitly supported by debt financing rather than out of operating cash flows and it is not even clear that this spending is generating sufficient return on investment. To this point, Meta’s share price received a beating when it missed earnings expectations because it was dramatically increasing its capex intentions. In summary, the AI story still has legs although it is worth not getting overextended in this area, given the slightly speculative elements that are now creeping into the theme.

Looking elsewhere

If you manage to escape the focus on AI, there are certainly interesting things happening in other sectors. Within healthcare, for example, we continue to see positive earnings growth underpinned by strong demand for GLP-1 drugs, primarily used for weight management. Meanwhile, healthcare insurance pricing has been an issue in recent quarters, but this is also improving.

Elsewhere in the real economy, industrials businesses have seen a rebound in logistics/travel demand which implies robust underlying business demand. Financials have also been good performers with banks seeing generally strong trading and lending performance while insurers and investment business have also benefitted from the market rally.

However, outside of the concerns about increased debt in the AI space it was notable that many consumer-focused businesses struggled this quarter. This came from a range of sub-sectors including homebuilders, big box retailers (like Walmart and CostCo), and even softer growth rates from traditionally defensive consumer staples companies. And this is the reason for my ‘cooking on medium’ view above. The dominant theme of AI investment remains robust and there are certainly other positive narratives driving stock prices, but as we see more risk, whether in rich valuations for those AI companies, or in early signs of a consumer slowdown, we must remember to balance those opportunities with the risks inherent – so that we can remain invested for the long run. Risk management remains the order of the day.

Key Takeaways

  • We saw a quite strong set of Q3 2025 US earnings figures.
  • There are still concerns around the AI narrative despite recent positive news.
  • Balancing risk and reward and investing for the long term remain key.

Sacha Chorley

Portfolio Manager

Sacha is a portfolio manager of the Quilter Investors Cirilium and Creation Portfolios. Prior to joining Quilter Investors in 2011, Sacha worked at Broadstone with their team of economists before moving into asset allocation and fund manager research.

Sacha is a CFA charterholder and has also completed the Chartered Alternative Investment Analyst qualification. Sacha has a degree in Maths from the University of Bath.

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