Thus far, the reaction to earnings season has been mixed among tech stocks and rather unclear. For instance, tech giant and AI-leader Microsoft (MSFT) recently reported earnings that exceeded expectations and showed robust AI growth. Nevertheless, despite the better-than-expected earnings, MSFT shares dropped more than 10% post-earnings, reflecting Wall Street’s concern over higher spending for AI infrastructure. This year, AI hyperscalers such as Microsoft and Alphabet (GOOGL) are expected to spend a whopping $500+ billion in CAPEX to fuel their AI ambitions.
Image Source: Carson Investment Research
The biggest, most controversial, and hottest debated question on Wall Street is: “With hundreds of billions of dollars spent on artificial intelligence infrastructure and data centers, is the return on investment worth it?”
Scott Bessent, a former Wall Street legend, market veteran, and the current U.S. Treasury Secretary, has repeatedly pushed the idea that AI technology will lead to a “productivity miracle.” Bessent is no stranger to bold market predictions. The then-29-year-old Bessent is best-known for providing George Soros and Stanley Druckenmiller with the idea that the British Pound was overvalued in1992. The rest is history – Soros and Druckenmiller decided to make a massive $10 billion short bet against the British Pound, ultimately leading to Soros Management “breaking the British Pound” and resulting in a $1 billion profit for the firm.
Image Source: TradingView
Although Bessent is best-known for helping to facilitate “Black Wednesday”, he is a macro investing legend who has successfully navigated several market cycles, including the internet-driven tech boom of the 1990s. In the late 1990s, Bessent observed the power of a new, groundbreaking technology on the U.S. economy. The proliferation of the internet led to unprecedented, non-inflationary economic growth. According to Bessent, artificial intelligence is about to trigger another technology-driven productivity boom, and history is about to repeat itself.
In a recent CNBC interview, Scott Bessent proclaimed:
“2025 was setting the table. 2026 is going to be the banquet for the American people. The economy’s taking off!”
The latest data shows that the S&P 500’s net margin excluding financials is at a record 13%. The massive margin expansion is proof that AI is transforming profitability for tech stocks right now.
