Monster AI Earnings & Economic Resilience to Power Up Growth ETFs

The S&P 500 and tech-heavy Nasdaq Composite advanced on July 31, 2025, thanks to blockbuster earnings from Meta META and Microsoft MSFT. This shows renewed investor confidence in Big Tech’s AI-driven growth.

Meta shares soared 11% on July 31, 2025, after topping earnings estimates and issuing stronger-than-expected guidance, even as the company ramps up AI-related investments. Microsoft stock gained 4% on July 31,2025, following its stellar results, pushing its market cap past the $4 trillion mark.

HSBC upgraded Meta Platforms to Buy from Hold with a price target of $900, up from $610. KeyBanc upgraded Microsoft to Overweight from Sector Weight with a $630 price target following the fiscal Q4 report.

Pickup in PCE Inflation

On the macro front, the Federal Reserve’s preferred inflation gauge — the Personal Consumption Expenditures (PCE) index — showed price growth accelerated in June, keeping inflation above the Fed’s 2% target.

Fed Stays Put

Higher inflation followed Wednesday’s Fed decision to leave interest rates unchanged, with two members dissenting. Fed Chair Jerome Powell emphasized that no decision had been made regarding a rate cut in September, overruling President Trump’s claim that a cut was imminent. Market odds for a September cut dropped to below 40%, down from roughly 60% prior to the meeting, according to CME Group data.

Easing Trade Tensions

In trade developments, concerns over a looming trade war eased as a series of agreements were struck. A key deal with South Korea, announced late Wednesday, sets a 15% tariff on Korean imports, while U.S. exports will face no duties.

Trump on Thursday also said he was granting Mexico a 90-day reprieve on higher tariffs, saying he would extend Mexico's current tariff rates to allow for more time for negotiations.

US Economy Rebounds in Q2

After a surprise contraction in the first quarter, the U.S. economy rebounded strongly in the second quarter of 2025. According to the Bureau of Economic Analysis's (BEA) advance estimate, gross domestic product (GDP) grew at an annualized rate of 3% between April and June. This topped Bloomberg economists’ forecast of 2.6% growth.

ETFs in Focus

Vanguard S&P 500 ETF VOO, Vanguard Total Stock Market ETF VTI, Invesco QQQ Trust Series I QQQ, Vanguard Growth ETF VUG — represent exchange-traded funds (ETFs) from various investing spectrums of the U.S. market that should gain in the current economic situation.

Note that the monster earnings from Meta and Microsoft solidify the fact that the AI rally is here to stay. Moreover, easing trade tensions and U.S. economic resilience are supporting a successful AI run.

While ETFs like VOO and QQQ are broader in nature, they are packed with Big Tech stocks, which make them a must-have in one’s portfolio. Other growth ETFs may include iShares Russell 1000 Growth ETF IWF, Vanguard Information Technology ETF VGT and iShares S&P 500 Growth ETF IVW.

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This article originally published on Zacks Investment Research (zacks.com).

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