00:00 Speaker A
We got earnings season coming up here. We’re going to start with the big banks, but we’ll get tech a little bit after that and this incredible wave of capex spending. All the money thrown at AI is going to be front and center.
00:11 Speaker A
How do you think this plays out?
00:13 Speaker B
Yeah, we’ve seen enormous, you know, capital expenditures by the big tech companies over the last couple of years. Um, I think if you add it up, it’s a 75% increase from 2024 to 2025 and another 75% increase coming here in 2026. Investors see all that spending and their concern is, um, what do we get in exchange for it? Um, how much how much, you know, revenue increase can we get and how’s that going to flow through to the bottom line? I think, um, this quarter, we’re going to see a big acceleration in cloud computing revenue growth for the big tech companies. So AWS, um, owned by Amazon and then GCP owned by Google. Those are the big two where I expect serious acceleration. I think Amazon was 24% last quarter. Um, I expect something close to 30 um here in the first quarter.
01:04 Speaker A
And how do you think how do you think the market takes that? Do you think, okay, this is this is paying off now? Is that what the market says?
01:09 Speaker B
Um, for four straight quarters now, the big tech companies have revised, have caused investors to revise down their free cash flow forecasts looking ahead. Um, I think investors want that to stop and they want to see those free cash flow revisions start to come back up.
01:28 Speaker A
Sure.
01:28 Speaker B
Um, that can happen if, um, revenue growth accelerates and the CAPEX estimates going forward remain stable. We need to see these companies accelerate their revenues, um, in order to justify all that capex. Otherwise, um, what’s Amazon doing spending $200 billion of investors’ money, um, to build new data centers just this year alone. And I think for Nvidia, um, you know, Nvidia is selling, Nvidia is providing a lot of the equipment that these companies are buying, representing that capex. Um, Nvidia investors want to see those customers putting those chips to good use and making big profits from them, so they’ll be willing to buy more next year.
02:08 Speaker A
What about, so what about the monetization? Because that’s what we’re getting at here, right? When do we see that pick up and I maybe we have to wait deep into earnings season for some of these smaller companies to report, but do you when do you see that kind of percolating through?
02:22 Speaker B
Yeah, to me that monetization is represented by the accelerating revenue growth. So AWS reaching the 30s.
02:28 Speaker A
So that by itself is just the evidence, yeah.
02:30 Speaker B
That is, that is monetization of these GPUs going into new data centers. And then we need to see those, those accelerating revenues flow through to the bottom line, you know, at a margin in the 30s for Amazon and probably the 20s for GCP and probably similar for Microsoft.
