Big Tech Earnings: the AI boom rolls on!

Welcome to AI Collision 💥,

In today’s collision between AI and our world:

Earnings, earnings, earnings
Bubble or build?
Telsa vs. Toyota

If that’s enough to get the profits cashing in, read on…

AI Collision 💥

For the past six months, the market has been in a state of AI-flux. Not sure whether this revolution is exactly that, or if it’s just big tech taking a massive punt spending up big with no real financial outcome.

Talk of AI valuations being wildly overpriced, spending unable to continue at this rate, where’s the profit?

It’s the same doubt that circles every major technological leap…overpromise, hype it up, underdeliver, market crash.

But this quarter, Big Tech just silenced the critics. And if you were in any doubt about how AI translates into profits, we’ve just had a sneak peek as to what that might look like.

Amazon, Meta, Microsoft, AMD. All four have recently posted results that didn’t just beat estimates they smashed them. Most of it thanks to AI.

Also, this time around, earnings beats translated into stock price gains. For several quarters now Big Tech has beat expectations, but due to increasing AI spend, the “analysts” on Wall St have beaten down the stock prices because of AI fear.

Well let’s just put that all to bed now, shall we?

The narrative shift in recent months suggested that hyperscaler AI spending would slow, that the frenzy was tapering off. Talk was the Microsoft was completely backing out of AI grand visions.

Capex fatigue, some suggested. Analysts warned that all this investment was too speculative, that monetisation and pathways to profit remained murky (at best).

But here’s the thing that I’ve said before, the returns are never immediate. The payoff runway for most of this takes at least 18 months.

The infrastructure has to be built. Then optimised. The models trained. And then that has to roll out to customers, within the organisation and then only then can it translate into profits which, only report after the event itself.

We’re now just starting to see the beginning of what that looks like. And my view is that quarter, after quarter, after quarter things will only improve.

Microsoft was first out of the gate, announcing $70.1 billion in revenue and a staggering $25.8 billion in net income. Azure AI revenue surged 33%, with CEO Satya Nadella noting that AI services were now embedded across the Microsoft product line.

Copilot is now a full-fledged product with Microsoft saying, “More than 230,000 organizations, including 90% of the Fortune 500 have already used Copilot Studio.”

Earnings per share was $3.46, an increase of 18% and it smashed the expectations on Wall St. The stock was up 9% off these results.

Meta followed, riding a 16% revenue boost to $42 billion and 35% net income spike thanks to AI-driven ad targeting and its expanding Meta AI assistant. They say they’re closing in on a billion monthly users.

Their earnings per share was at $6.43 again smashing expectations thanks to their heavy jumps in revenues and profits thanks to AI.

The stock popped over 5% after the earnings release.

Even AMD, often seen as Nvidia’s sidekick in the GPU wars, posted a 36% YoY revenue surge and is now carving a significant stake in the data centre AI market with its Instinct GPUs.

While only slightly beating expectations, AMD announced earnings per share of $0.96 on revenue of $7.44 billion and that was enough to see their stock jump 5% after the release too.

Amazon too, growth across the board with a highlight on their AI enabled cloud. AWS grew 17%, and it wasn’t just boring cloud infrastructure, it was Trainium2 chips and generative AI offerings that are moving the needle.

They posted earnings per share of $1.59 vs. $1.36 expected. And yet the revenue number was around expectations. That says they’re getting better at efficiency, a by-product of AI integrations.

Side note: Amazon has also just launched their first set of Project Kuiper satellites to rival Starlink. More on that in the coming weeks, but a huge development for Amazon.

None of this surprises me.

The most important point isn’t just that the earnings were good, we knew they’d be good, but that they confirm what we’ve been saying at AI Collision all along… the AI investment cycle has an 18 to 24-month lag.

What was spent in 2023 is showing up in margins and earnings now. This isn’t the end of the boom. This is the beginning of it.

As this lag compresses, when productivity gains are realised, when customers upgrade their systems to AI AWS, Copilot-native workflows, when retail media runs on Meta’s AI models, and when enterprises are tapping into AMD powered AI factories, that’s when the exponential curve kicks in.

The result is you get what we saw this week in the markets at multiples more.

My view is that as this plays out, then maybe we see Microsoft at $10 trillion, Amazon too.

Meta breaks $5 billion, and AMD becomes another $1 trillion chip giant.

So no, this isn’t a bubble. It’s the early stages (still) of a boom. The AI age is laying new foundations for how everything works, from medicine to marketing, from logistics to law, advertising to art. And the companies building the foundations are cashing in big time.

Trust in the boom. The AI effect has only just begun.

Why did Trump create a Sovereign Wealth Fund?

A Sovereign Wealth Fund? In America?

For the first time in U.S. history, this controversial move is being tied to a massive, long-hidden mineral fortune.

Insiders say it could spark a new investment wave and open the doors for international investors, including those here in Britain.

Click to learn why the smart money is already watching closely

Capital at risk

Boomers & Busters 💰

AI and AI-related stocks moving and shaking up the markets this week. (All performance data below over the rolling week).

man in black suit jacket and black pants figurine

Boom 📈

Microsoft (NASDAQ:MSFT) up 10%
Arm Holdings (NASDAQ:ARM) up 10%
Western Digital (NASDAQ:WDC) up 9%

Bust 📉

Brainchip (ASX:BRN) down 23%
BigBear.ai (NYSE:BBAI) down 13%
Palantir (NASDAQ:PLTR) down 6%

From the hive mind 🧠

A humanoid robot with robot strength…what could possibly go wrong?
We’ve covered this on and off over the months, about how AI is uncovering mysteries from thousands of years ago. Well, in a new development they’ve now figured out who wrote it all!
He’s the CEO of Fiverr, the company that finds people to do little jobs that only cost a “Fiverr”. And yes, he just said AI is coming for your job, and his, in a matter of months

Artificial Polltelligence 🗳️

Seeing as Monday was a bank holiday in the UK, today I’m going to look at our results from the polls last week, and we’ll get a new poll on Friday.

First off… Tesla vs. Toyota.

This may be my favourite result from any poll I’ve done in the last couple of years.

We all know Tesla is packed with tech. We also know Toyota has an insane reputation for reliability and longevity.

So, can Tesla get their cars and brand to a reliability of Toyota? Or is that another 100 years away…if ever? Or is it more likely that Toyota just packs in the tech to already highly reliable and trustworthy cars?

Seems like the latter is more likely than the former. And when it comes to the preferred option for reliability for life there’s a clear winner.

Then we took a look at Meta and their quest to become the start and end of an advertising journey. A vertically integrated ad company where you no longer need to figure out what you want to do and ask them to make it work, you just tell them what you want the outcome to be and then let them (and their AI) at it.

And if they can do that… how big and how great and how valuable does Meta become?