AI: Big Tech roars 'AI' on mid-year Earnings Calls. RTZ #800

The Flashing Green Lights I wrote about over a week ago (# 791), are flashing faster. Four of the Mag 7 have reported better than expected results, especially Microsoft and Meta. As well as Apple and Amazon a day later.

And investors like what they see.

And for now they seem fine with the ‘pedal to the metal’ stance on AI Infrastructure and Talent investments by most of them.

With less of a focus on when the AI revenues and profits may show up at scale. We already saw Google and Tesla report last week, and this week it was Microsoft, Meta, Amazon and Apple’s turn. Microsoft crossed $4 trillion market cap for the first time, joining Nvidia.

As the WSJ noted after the strong Microsoft , Meta and Google results, investors are giving the companies a big pass on their accelerating AI investments,

“Strong performance of core businesses gives cover to blowout AI investments—for now.”

“Meta and Microsoft are both showing that obscene spending on new businesses can work—as long as the older ones are humming.”

Both stocks Microsoft and Meta, were up almost 10% each after their reports:

“For Meta, that was hardly a given heading into their latest quarterly reports on Wednesday. Meta’s stock price in particular had slumped nearly 6% over the past month, following a flurry of news reports about Chief Executive Mark Zuckerberg lavishing nine-figure paydays on artificial-intelligence researchers. And both Meta and Microsoft were already on track to spend more than 30% of this year’s revenue on capital expenditures, compared with about 15% to 20% historically.”

“Those outlays were already beginning to look like mere table stakes after Google parent Alphabet/ Google used its report last week to bump up its own capex spending plans for this year to $85 billion. That is more than the annual revenue generated by 92% of companies in the S&P 500.”

As CNBC and NYTimes commentator Andrew Ross Sorkin noted on x/Twitter, and on CNBC:

“Back is January, Microsoft’s CEO Satya Nadella told me: “All I know is, I’m good for my $80 billion.” Well, he just upped the ante this afternoon. He is now “good for” $120 billion.?”

All except Apple had their AI strategies and investments as a core topic of conversation. Apple for its part got a boost from iPhone buying ahead of Washington’s tariffs, and a higher than expected growth rate in high margin Services revenues. That segment is now the second largest business for Apple after its iPhone business.

Which is saying something. And Apple showed better growth in iPhone sales in China, which wasn’t expected. They’re of course continuing fo focus on AI their way, via Apple Intelligence, and a bottom up focus on LLM AI/ML (machine learning) driven strategy by applications and services up, across their various platforms. And they’re focused on Developer support to build on their platforms.

Microsoft and Amazon showed stronger than expected growth in their cloud businesses. Microsoft despite their ongoing negotiations with OpenAI to re-craft their iconic partnership. Amazon saw good growth at market leading AWS, driven by both in-house and their partner Anthropic driven LLM AIs.

Meta showed strong growth across their now 3.5 billion dailly active users across their major properties. And founder/CEO Mark Zuckerberg penned a piece highlighting their AI Superintelligence strategy, which will take hundreds of billions in investment, and years to deliver consumer AI products and services at scale. Much of that through ‘smart glasses’ of different types. But ‘Zuck’s’ commitment to his AI course is palpable.

All that leaves Nvidia amongst the Mag 7 to report on August 27th. And the market expects no major surprises, given that their AI GPUs and infrastructure is what makes it possible for all of the above, and of course OpenAI , Anthropic et al,, to do their AI thing.

The details of the quarter are all worth noting and absorbing. But the broader picture is that the AI Tech Wave is accelerating, with fast flashing green lights from the markets both public and private, as well as US regulators.

The head winds to potentiallly to worry about remain US/China geopolitical tech trade and tariff headwinds.

As well as when investors, especially the public ones, start worrying about the financial returns from these investments, and not just cheer on the accelerated, extraordinary AI capex at unprecedented rates. Especially on AI Data Center global table stakes.

For now mid-year 2025, the music in the AI market musical chairs game is getting louder and speeding up. And the players are running around the chairs faster than ever.

As always, we’ll be keeping a close eyes on both the AI fundamentals and financial forces in this AI Tech Wave, whichever direction they choose to blow. Stay tuned.

(NOTE: The discussions here are for information purposes only, and not meant as investment advice at any time. Thanks for joining us here)