In what is anticipated to be a pivotal week for earnings season, four tech giants - Microsoft, Apple, Amazon, and Meta - are set to release their quarterly results. These highly influential companies collectively account for almost 20% of the S&P 500 index, carrying significant weight in the market.

Investors are on high alert following last week's tech stock sell-off triggered by disappointing earnings reports from Tesla and Alphabet. The performance of these big-name tech companies this week could either exacerbate the existing market cracks or help stabilize the situation.

Of particular interest to investors are Microsoft's and Amazon's capital expenditures, as concerns have arisen over Alphabet's substantial spending on artificial intelligence (AI). Wall Street analysts have expressed caution towards excessive AI investments, and any substantial capital expenditure announcements from these tech giants might further heighten those concerns.

Bank of America estimates that more than one-third of the aggregate S&P 500 earnings will be reported this week, with Microsoft, Meta, Apple, and Amazon all slated to disclose their financial results. The outcomes of these reports will undoubtedly impact major indexes, potentially triggering significant market movements.

Last week's earnings report from Alphabet revealed higher-than-expected earnings growth but fell short in terms of capital expenditure figures. Investors focused on the doubled investment in AI infrastructure, viewing it as a potential cause for concern. Alphabet CEO Sundar Pichai defended the spending, stating that the risks of underinvesting in AI outweighed the risks of overinvesting.

Analysts predict that Meta and Amazon will be major contributors to the S&P 500 earnings growth this quarter, but the formidable earnings growth might not be sufficient to appease Wall Street. The technology sector is under scrutiny due to escalating costs associated with AI investments. However, industry experts argue that this elevated capital expenditure should be viewed as a positive sign of healthy investment rather than disappointing expense.

Executives from these tech giants will likely emphasize the revenue-generating potential and margin expansion brought about by AI in an effort to address concerns about its costs. Microsoft, for instance, experienced a 30% growth in its Azure and cloud services business in the first quarter, with AI services contributing 7 percentage points of that growth.

The recent market correction has seen a rotation of investor focus, with an increasing interest in small-cap stocks. The tech stocks that previously led the market to record highs now face a correction as investors anticipate potential interest rate cuts. Nonetheless, analysts believe that the sell-off may be short-lived and present a promising opportunity for long-term investors.

As the week unfolds, market participants will closely monitor the quarterly results of these tech giants, as their performance will shape market sentiment and potentially lead to further market turbulence or recovery.