AI: Tech companies 'Full Speed Ahead' on AI. RTZ #711

The earnings season for big tech companies is almost done, and the momentum for AI capex for the Mag 7 continues relatively unabated. This despite the headwinds of the headwinds of the Trump tariffs, and the US/China AI Tech curbs that continue to ramp up. As noted this saturday, the tech results gave broader support for tech stocks to recover some of their losses since “Liberation Day” on tariffs last month. But it all remains on a knife’s edge for Wall Street, given the uncertainties embedded in the headwinds this AI Tech Wave.

Axios summarized it well in “Tech earnings: What we learned this week”:

“Spending on artificial intelligence isn’t slowing, and tariffs — so far — aren’t taking a huge toll on business, Big Tech told us this week.”

“Why it matters: A slew of tech giants just delivered solid earnings, providing at least some answers to burning questions about how the industry is faring in the midst of President Trump’s trade war.”

“State of play: Amazon, Meta and Microsoft all showed no signs of pullback on data center and infrastructure spending, despite recent reports warning of an industry slowdown.”

• “Meta on Wednesday actually raised its spending forecast for 2025 by around 8%, to a range of $64 billion to $72 billion, attributing the jump to “additional data center investments to support our AI efforts.”

• “Microsoft didn’t change its spending guidance for the second half of the year from what it signaled in January.”

• “And Amazon spent $10 billion more in the first quarter than it did last year, largely on technology infrastructure to support demand for its AI services.”

  

And customers aren’t stepping back either, for now:

“Between the lines: Business customers aren’t pulling back on their own AI investments, even if they may be tightening their belts for a lower growth environment, executives said, echoing the message from Google parent Alphabet earlier this month.”

• “Cloud and AI are the essential inputs for every business to expand output, reduce costs and accelerate growth,” Microsoft CEO Satya Nadella said on the company’s earnings call Wednesday.”

“On tariffs and customer uncertainties, Big Tech delivered a bit more of a mixed message.”

Lots of questions of course in the details:

“Meta’s strong earnings tamped down investor fears of a pullback from growth-wary advertisers.”

• “At the same time, it acknowledged that it expects its own costs to increase for infrastructure hardware, which contributed to its raised projection for full-year spending. Alphabet delivered a similar message earlier this month.”

“Apple estimated that the current tariff plans in place would add $900 million to its costs in its June quarter. But the company is already making plans to try to reduce that further out.”

• “CEO Tim Cook said on the company’s earnings call it expects the majority of iPhones sold in the U.S. to come from India, a result of its previously reported diversification from China.”

• “U.S. iPad, Mac, Apple Watch and AirPods sales would almost all come from Vietnam, he said.”

  

Amazon CEO Andrew Jassy had the ‘last words’:

“Amazon’s earnings call saw the word “tariffs” surface 17 times. CEO Andrew Jassy said the retail giant hadn’t seen any significant rise in seller prices — yet.”

• “On the customer side, it hasn’t seen any falloff in demand, although it did see some signs of possible forward buying ahead of tariffs, Jassy noted, before cautioning on all of the above, “this could change.”

“The bottom line: Jassy said what everyone is thinking.”

“This could Change”, indeed. That’s where we stand in this AI Tech Wave going into the next quarter and beyond. Lots of knife’s edge twists and turns to come most likely. 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)