Stocks follow earnings per share. Over the long term, the correlation between earnings growth and share price performance is as high as 98 percent. Everything else is noise. Macro fears, geopolitical tensions, quarterly results that fall short by a fraction — in the long run, they hardly matter. What counts is how much a company earns and how those earnings develop over time.
Yet time and again, investors allow themselves to be seduced by the noise. Quarterly figures that marginally miss expectations lead to price declines of 10 percent or more. The focus shifts from the long term to the short term, a phenomenon I have previously described as quarterly capitalism. It is not only inefficient, it is also costly for investors who get swept up in it.
AI is systematically underestimated
Anyone who believes the AI revolution is already fully priced in is mistaken. Artificial intelligence continues to be underestimated, both in scale and in speed. The four major hyperscalers — Alphabet, Amazon, Meta and Microsoft — are set to invest nearly 700 billion dollar in AI infrastructure in 2026 alone, up from 410 billion dollar in 2025. These are not speculative promises, but concrete investments, backed by growing revenues and rising profits. Data centers are operating at full capacity, and waiting lists for AI chips are growing. Artificial intelligence represents a structural economic shift, and it is still only in its early stages.
A historic buying opportunity
This year, the shares of the Magnificent Seven have come under pressure and are each underperforming the broader S&P 500. The price-to-earnings ratio based on this year’s estimates has fallen below that of the consumer staples sector — the sector of food companies and household brands, which are hardly known for spectacular growth. Goldman Sachs calculated that the Magnificent Seven are trading at their lowest valuation since 2018. Bridgewater adds that with earnings growth of 14 percent per year — lower than the 20 percent achieved in recent years — the companies are already fairly valued.
Combined earnings growth over the past quarter came in at 27.2 percent, well above the expected 20.1 percent. While share prices are falling, profits are rising. That makes valuations more attractive at a rapid pace.
Nvidia, Meta, Amazon and Tesla: stronger than expected
The entire group performed better than the market anticipated. Nvidia reported year-on-year revenue growth of 73 percent, with its data center division reaching 62.3 billion dollar. Earnings per share came in at 1.62 dollar versus expectations of 1.53 dollar. Nevertheless, the stock fell by more than 5 percent.
Meta reported revenue growth of 24 percent, with annual revenue reaching 201 billion dollar, and is guiding toward significantly higher investments of 115 to 135 billion dollar in 2026 — a signal of unparalleled confidence in the AI growth opportunity.
Amazon exceeded expectations with quarterly revenue of 213.4 billion dollar. Amazon Web Services (AWS) grew 24 percent year-on-year to 35.6 billion, while AWS’s order backlog increased 40 percent to 244 billion. Yet the stock declined after the results, as investors focused on the massive investments Amazon announced for 2026.
Even Tesla posted fourth-quarter earnings per share of 0.50 dollar, 11 percent above expectations, with a gross margin of 20.1 percent — the highest level in two years. The market prefers to focus on declining car sales rather than improving margins and the promising outlook for robotaxis and the Optimus robot. That said, Tesla is also the only stock among the Magnificent Seven that can reasonably be described as highly valued.
Microsoft and Apple: temporarily misunderstood
Microsoft saw its share price fall by more than 10 percent following solid results. Azure grew 39 percent but came in marginally below expectations — not because demand is weakening, but due to capacity constraints. Once those bottlenecks are resolved, growth can accelerate again.
Apple delivered a quarter that justified a 5 to 10 percent increase in its share price. The iPhone sold exceptionally well, including in China where revenue rose 38 percent. Yet the stock barely moved. Apple Intelligence is still in the early stages of its rollout, and the upgrade cycle has only just begun. If AI shifts from the cloud to the device itself, Apple is strategically very well positioned.
Patience as a competitive advantage
The Magnificent Seven are investing heavily in AI infrastructure. In the short term, these investments weigh on margins and fuel fears of a bubble. But demand for AI services is not declining — it is increasing. Artificial intelligence is developing faster and on a larger scale than even the most optimistic scenarios predicted three years ago. Anyone who has not yet priced that in is behind the curve.
In the long term, share prices follow earnings. And those earnings at the Magnificent Seven are set to rise significantly in the coming years. Patience is therefore the most underestimated competitive advantage of the long-term investor.
Han Dieperink is chief investment officer at Auréus Vermogensbeheer. Earlier in his career, he was chief investment officer at Rabobank and Schretlen & Co.