The first week of the third quarter earnings season has come and gone, and while the sample size may be small, one clear trend is emerging – anything less than a flawless print is simply not enough to impress investors. Netflix, T-Mobile US, and AT&T have all seen their stock prices tank by 10%, 3%, and 3% respectively since their earnings reports, highlighting the increasingly discerning nature of investor appetite.

But what’s behind this trend? While there are certainly idiosyncratic factors at play in each of these companies, a closer look at the broader TMT sector reveals a telling pattern. It seems that only those names with AI-related stories have been able to hold onto their gains post-earnings, while the more traditional tech and cyclical names within the sector are struggling to make headway.

On the one hand, this may seem counterintuitive – after all, TMT has long been synonymous with cutting-edge technology and innovation. But the reality is that investors are increasingly demanding more than just flashy promises of AI-driven growth. They want to see concrete results, tangible progress, and a clear path forward. And for those companies that can’t deliver on these fronts, the consequences are clear – their stock prices suffer as a result.

Of course, this dynamic could shift quickly depending on how the hyperscaler results shake out this week. If these companies can deliver on their AI-related promises and show meaningful progress towards profitability, investor appetite may once again turn in their favor. But until then, the struggle for TMT stocks to hold onto gains after earnings looks set to continue.