Earnings across the S&P 500 are projected to rise above 20% for a second straight quarter, buoyed by soaring profits at semiconductor and AI‑infrastructure firms. The surge helps keep price‑to‑earnings multiples from spiraling as investors chase the AI boom. Heavy spending by hyperscalers such as Meta, Microsoft and Alphabet fuels the rally, lifting the Nasdaq Composite by roughly 8% year‑to‑date.

The earnings lift masks a timing gap between cash outlays and expense recognition. Chipmaker Nvidia records revenue immediately when it ships GPUs, but buyers treat the machines as capital assets, depreciating them over several years. Consequently, hyperscalers’ flow takes a hit now while the hit to net income is deferred, until data‑centers become operational. This accounting rhythm also skews quarterly cash‑flow metrics, complicating valuation models.

Morgan Stanley’s Todd Castagno calls the period a “golden window” because top‑line growth and margins look strong for both suppliers and buyers. Yet the unprecedented capex surge means a wave of depreciation will soon hit income statements, and analysts’ forecasts for future spending diverge sharply. Investors should gauge how the looming expense curve could compress earnings once the deferred costs materialize.