# Alphabet earnings offer a moment of truth in this tech stock battle > Source: > Published: 2026-07-22 12:15:14+00:00 Alphabet ([GOOG](https://finance.yahoo.com/quote/GOOG/), [GOOGL](https://finance.yahoo.com/quote/GOOGL/)) [earnings out later today](https://finance.yahoo.com/technology/article/google-parent-alphabet-to-report-q2-earnings-in-latest-test-of-ai-trade-110000124.html) will likely mark a moment of truth for tech investors. That is, whether to stick with a renewed ["Magnificent Seven" bull trade](https://finance.yahoo.com/markets/article/a-violent-ai-unwind-is-hiding-beneath-a-resilient-stock-market-chart-of-the-day-100000350.html) or buy the steep sell-off in semiconductor stocks and perhaps load back up on both by the year's end. **Quick insight:** Over the past month, the performance gap between semiconductor stocks and Magnificent Seven stocks has expanded, as seen in the [Yahoo Finance AlphaSpace](https://finance.yahoo.com/about/promos/gold/alphaspace?100003557) chart below. The Magnificent Seven comprises Apple ([AAPL](https://finance.yahoo.com/quote/AAPL)), Alphabet, Microsoft ([MSFT](https://finance.yahoo.com/quote/MSFT)), Amazon ([AMZN](https://finance.yahoo.com/quote/AMZN)), Meta ([META](https://finance.yahoo.com/quote/META)), Tesla ([TSLA](https://finance.yahoo.com/quote/TSLA)), and Nvidia ([NVDA](https://finance.yahoo.com/quote/NVDA)). The divergence reflects investor indecision on whether the previously virtuous circular relationship between chips and hyperscaler capex is sustainable, given that hyperscaler forward free cash flow is likely to turn negative in this quarter, Evercore ISI strategist Julian Emanuel explained in a new note on Wednesday. "With Korea's KOSPI [index] setting the tone for a 'buy the dip' bid to semis, Alphabet's report this afternoon takes on added significance," Emanuel added. "Can an earnings beat and strong capex intentions lift both the Mag 7 and the semi stocks together, catalyst for new highs in the rangebound S&P 500? Our base case is 'yes', but the time for conjecture is over. The moment of truth has arrived." **Inside the action:** Semiconductor stocks are under heavy pressure as investors worry that the AI spending boom may be cooling. The sector has experienced years of extraordinary growth and soaring valuations. But it's now facing concerns about potential export restrictions, tariffs, and geopolitical tensions that could disrupt chip sales to key international markets. Not helping sentiment is the recent release of the [low-cost Kimi K3 model by China's Moonshot AI.](https://finance.yahoo.com/technology/article/chinas-ai-models-are-shrinking-us-lead-185555366.html) Some on the Street are comparing it to the DeepSeek model release circa early 2025. These new Chinese models are calling into question whether US tech companies are overspending on AI. Investors have used semis as a source of funds to buy back into the Magnificent Seven. While companies such as Amazon and Meta are investing aggressively in AI capital expenditures, there is a new view that the stocks have gotten hit too much this year, given their still-strong fundamentals. **The bottom line: **Watch the market's reaction to Alphabet earnings on Thursday morning. If Alphabet comes out and lifts its 2026 capex guidance and the stock advances, it will be a good sign to perhaps start nibbling on semiconductor stocks. The opposite is true if the stock takes a hit amid fears of AI spending cuts.