The US stock market is set for a rebound, fueled by impressive earnings from Alphabet and Microsoft. These tech giants have revived hopes for a Big Tech-led rally, despite concerns over inflation.

Alphabet and Microsoft’s shares have seen significant gains, with increases of around 12% and 4% respectively. Their strong earnings, driven by robust AI demand and cloud revenue, have boosted investor confidence. This confidence had been shaken earlier in the week by Meta’s disappointing forecast.

However, the market is also bracing for the release of the Federal Reserve’s preferred inflation gauge, the personal consumption expenditures price index for March. A US first quarter GDP report released on Thursday signaled slower economic growth and hotter inflation than expected, causing stocks to sell off.

Investors are closely watching the PCE report to confirm that inflation is heating up again. This would make the case for the Fed to cut rates less deeply and later. Since the start of the year, traders have recalibrated their bets from seven rate cuts in 2024 to one.

In other news, Snap shares rocketed up 26% in premarket trading as Wall Street welcomed signs a revamp of its digital ad business is finding takers. Meanwhile, Rubrik’s stock surged 17% on its IPO day, indicating a strong market response to another AI ecosystem play.

However, concerns over AI-related spending at big cap tech companies like Meta, Microsoft, and Alphabet have caught Wall Street off guard. These companies have signaled a potential material lift in spending this year and in 2025, causing some to worry about cost overruns in the AI trade.