By Angela Palumbo

Tariffs and artificial intelligence spending are just one piece of the puzzle that tech investors will be watching as another earnings season kicks off this month.

The largest tech companies tend to report their results relatively close to one another. This time, all of the Magnificent Seven companies, except for Nvidia, are expected to weigh in near the end of July.

Here are some themes that could make a difference.

What's Next for AI Spending?

There is no shortness of concerns over tariffs and geopolitical tensions, but that hasn't stopped large tech companies from investing billions in artificial intelligence. Meta Platforms, Facebook's parent, has said it expects 2025 capital spending to be between $64 billion and $72 billion, while Alphabet expects capex of $75 billion. All signs point to companies continuing to spend big.

The recent performance of Micron Technology -- a maker of high bandwidth memory chips -- is a favorable indicator. Micron reported better-than-expected third-quarter financial results on June 25 ,while also providing strong guidance. HBM chips are increasingly used in AI applications, so strong demand for them means customers are still writing checks for infrastructure.

Steve Sosnick, chief strategist at Interactive Brokers, told Barron's that while investors have come to expect high AI spending, they will soon be looking for proof that the investments will make a difference for the companies dishing out the cash.

"At some point, all this spending has to lead somewhere," Sosnick said. "Is AI really a buzzword, or is it meaningful to bottom lines?"

Joe Tigay, portfolio manager of the Rational Equity Armor Fund, had a similar view. He told Barron's that he is OK with large research and development investments from companies like Microsoft and Amazon.com "if they have a 10 year vision that isn't going to be profitable for the next couple of years, but they can see where it would turn around."

Damage From Tariffs

President Donald Trump shocked the market with his heavy so-called reciprocal tariffs just after the end of the first quarter, on April 2, only to suspend them until July 9. Investors will want to know how the levies are affecting companies, and what managements expect comes next.

Sosnick says investors won't be satisfied with companies choosing not to give forecasts, as Tesla and Snap did when they unveiled their first-quarter results.

"I think by now, these companies have had at least three months to deal with it. They can't get away with throwing their hands up in the air and saying, 'we need to wait and see,'" he said. "We gave them that pass. I think that was okay, because everybody was reeling at that point. But now, there's a more defined set of scenarios."

The Search Syndrome

Internet search traffic has taken a hit this past year as people experiment with AI-powered chatbots like OpenAI's ChatGPT and Perplexity, as Barron's reported in June. The introduction of Google's AI Overviews -- AI-generated responses that show up at the top of Google's search page -- have also lessened the need to click on blue links to get answers to queries.

Several companies noted last earnings season they were seeing a decline in search traffic. Management from travel website Expedia Group said that they "see that people's search behavior is changing." Executives at the financial resource website NerdWallet said that they "still expect MUUs [monthly unique users] to decline year-over-year in the near-term."

Investors shouldn't be surprised to hear more of the same on earnings conference calls, especially because search referrals took a big hit in May.

What About Streaming?

The biggest AI companies aren't the only tech players to keep an eye on. Netflix, which kicks off the profit-reporting season for tech on July 17, will be closely watched for signs that people might be cutting back on nonessential spending. So far, so good.

The shares, seen as a haven for investors, are up 44% this year compared to the 5.9% rise of the S&P 500. That is also far above the gain of any Magnificent Seven stock.

A positive sign is that the research firm Nielsen reported in June that streaming accounted for more viewing hours than broadcast and cable, together, for the first time in May.

Other media companies could also report strong growth as people gravitate to streaming. Comcast stands out in that crowd.

The media company has found a winner with Love Island USA , which is on Peacock six days a week. It's possible Comcast will report some type of growth for its Peacock streaming service, potentially offsetting declines in traditional television, as people switch to streaming and tune into that popular show.

What Can Investors Do to Prepare?

Stocks have mostly rallied from their April lows, making now a perfect time for investors who are unsure if stocks will go higher after earnings, to reassess their risk, Sosnick said.

"Perhaps reassess your portfolio and if you started out by being, let's say 50% tech, and you find that you're now 85% tech, maybe you want to reallocate some of that," he said.

Meanwhile, Equity Armor's Tigay says he remains confident in the performance of big tech. "I think sticking with the mega cap tech companies is the way to go," he said. "They will continue to succeed."

Write to Angela Palumbo at angela.palumbo@dowjones.com

This content was created by Barron's, which is operated by Dow Jones & Co. Barron's is published independently from Dow Jones Newswires and The Wall Street Journal.

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July 03, 2025 02:00 ET (06:00 GMT)

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