Hey everyone, welcome back to the show. Today, we’re diving into the fascinating and ever-evolving world of artificial intelligence, specifically through the lens of recent earnings reports from tech giants Google, Microsoft, and Meta. If you’ve been following the AI trade, you know it’s a hot topic, and these updates give us a lot to unpack about where this industry is headed. So, let’s break it down and figure out what’s really going on beneath the surface of some mixed stock reactions and what it means for the bigger picture.
First off, let’s address the elephant in the room: the stock market’s response to these reports is a bit of a mixed bag. Google’s shares jumped 6% after hours, which signals strong investor confidence, while Meta and Microsoft took hits, dropping 7% and 4% respectively. At first glance, it might seem like a tale of two cities—some winners, some losers. But when you zoom out, the story isn’t really about the day-to-day stock fluctuations. It’s about the underlying trend that all three companies are doubling down on AI in a big way. The key takeaway here is that the AI trade is very much alive and kicking. These companies are ramping up their capital expenditures—think of it as the “brain” of AI—far beyond what analysts expected just a few months ago. Google, for instance, boosted its capex by about 7% for this year, with projections suggesting 20% growth next year. Microsoft hinted at a whopping 50-60% increase in capex through fiscal 2026, while Meta’s commentary points to a potential 60-70% surge for 2026 as well. This kind of aggressive investment is a clear sign that these tech giants see AI as the future, and they’re willing to pour serious money into building the infrastructure—hardware, data centers, you name it—to make it happen.
Why does this matter? Well, it’s a virtuous cycle. The more they invest in the “brain” of AI, the smarter and more useful these technologies become, driving more adoption and, ultimately, more revenue. This is fantastic news for companies like Nvidia, which supplies the chips powering much of this AI revolution, and for the broader ecosystem of firms benefiting from this spending spree. So, even if the stock market is jittery in the short term, the long-term outlook for AI remains incredibly robust.
Another piece of the puzzle is the cloud computing side of things, which is tightly intertwined with AI. Both Microsoft and Google reported strong cloud growth, with Google’s numbers accelerating to over 33% from 31.5% last quarter, and Microsoft holding steady at a solid 39%. What’s even more telling is that both companies admitted they’re supply-constrained—meaning they could have grown even faster if they had more capacity. Google expects these constraints to persist through the end of next year, and Microsoft projects the same through mid-2026. This bottleneck isn’t a bad thing, per se; it’s a sign of insatiable demand for cloud services, which are critical for AI applications. It’s like having more customers than you can serve—not a terrible problem to have, but it does highlight the urgency for these companies to keep building out their infrastructure.
Now, let’s touch on the psychological angle. Despite the generally positive news—huge investments, strong cloud growth—seeing bellwether stocks like Meta and Microsoft dip can spook investors. It might signal a moment of recalibration, a pause in the relentless enthusiasm we’ve seen around AI. But I’d argue this is healthy. Maybe we’re due for a breather to reassess valuations and expectations. Importantly, though, this recalibration is happening at a higher baseline than it was just a few months ago. The target for AI’s potential keeps moving upward, and my optimism about its transformative impact remains sky-high.
So, what’s the bottom line for you, the listener? The AI trade isn’t just intact—it’s thriving, even if the stock market’s day-to-day reactions don’t always reflect that. These companies are betting big on the future, and while there might be some bumps along the way, the trajectory is clear. AI is reshaping tech, the economy, and beyond, and we’re just at the beginning of this journey. Stick with me as we keep tracking this story—there’s plenty more to come. Until next time, take care!