00:00 Brian
Is the market right in selling these stocks off for these gigantic CAPEX numbers?
00:06 Brent
I think in the near term, yes. I mean, if you think about the costs needed to bring AI to life, they continue to increase. And I think we’re weighing the benefits of that CAPEX spending against that. If you think about what’s happening in the macroeconomic environment, which I think is contributing to this, if the Fed has to raise rates and these companies are producing negative free cash flow, that means they need debt and equity issuance to do the investment that they need to do to bring it to life. And that makes them more economically sensitive. And right now, um, you see rates moving higher. You see the Fed actually looking to possibly raise rates, which makes it more difficult to actually raise that uh, capital, which I think is adding to the volatility that you see here.
00:53 Brian
Uh, Brent, I would argue too, you know, part of the volatility here is that we still are hopping on these earnings calls and getting no sense on when that peak AI CapX is here. It’s not 2027, it ain’t 2028, it might even not even be 2035, Brent.
01:13 Brent
That’s that’s a large uh yeah, a large question that’s out there. and I think the biggest question is are are companies actually using this to increase their profitability and productivity? And that’s where I think the evidence is still mixed about what AI spending is is bringing from the companies that are going to benefit from using it. And that’s where I think there are still questions. Are companies actually increasing their revenues, the ones that are actually using it and that’s still a question that I think is open-ended.
01:42 Brian
Brooke, look, I’m not going to sit here and toss this Alphabet quarter in the trash. But I can understand why the stock is down on this news. Lots of focus on the CapX, as it should be. However, however, this company is showing signs it’s monetizing AI to a significant degree, more so than many of the other companies contained in the Mag 7.
02:02 Brooke
When you think about Tesla, that is Brian, correct?
02:05 Brian
Well, Tesla too. I mean Tesla as well. I mean they’re starting to monetize AI as well.
02:10 Brooke
Yeah, I I mean certainly what we saw over the course of these this afternoon, really on Wednesday evening into this morning, is investors sort of taking a beat and trying to understand when exactly we’re going to see this ultimately play out. You did hear specifically when it comes to Alphabet that they are seeing their Google services revenue increase quite dramatically. They were $95 billion for the quarter that was up 15% year over year and that was primarily driven by search. And it’s been an interesting run-up heading into the back half of 2025 and into the first half of 2026 as you see Google Gemini try out to come out ahead on top of that too. You do see Tesla really trying to optimize and monetize that uh robo taxi as well as the Optimus, but it seems like those physical AI models still have a long way to go, Brian.
