Five of the seven members of the “Magnificent Seven” will report results this week.
The most important number investors will get in these reports will come out on Wednesday afternoon and will require just a bit of math. And that’s the total capex spending for Microsoft (MSFT), Amazon (AMZN), Meta Platforms (META), and Alphabet (GOOG, GOOGL).
In January, these four hyperscalers announced plans to invest upward of $630 billion to fuel their AI ambitions. Taking the high end of annual forecasts from Alphabet and Meta, Amazon’s full-year forecast, and annualizing Microsoft’s latest spending, these four companies projected spending of $670 billion this year.
Whether this number rises or falls will tell the whole story of how some of the biggest winners of the AI trade see the field right now.
Much of this investment is spent on acquiring high-performance chips from the likes of Nvidia. Taking Nvidia’s quarterly results released in late February together with more recent indications from chipmakers like Taiwan Semiconductor Manufacturing Company (TSM), there are few signs of this quarter being the moment for any of these hyperscalers to signal a pullback in investment.
As tech mega-bull Dan Ives wrote in a note on Monday, these companies have “barely scratched the surface of this 4th Industrial Revolution now playing out around the world.” Which certainly doesn’t look like the moment to temper your investment in the cause.
But last week, we noted that at least two of these firms — Meta and Microsoft — were looking to lean out their teams. This investment doesn’t come free, and after years of these companies throwing off oodles of free cash, Big Tech is now tapping debt markets to fund this investment.
The contours of the AI trade have also appeared subject to quick change in recent months. Sentiment toward software stocks has washed out and enthusiasm for new AI models from startups like OpenAI and Anthropic seems to rise and fall in rapid succession. Some long-forgotten tech stalwarts of yesteryear like Sandisk (SNDK), Western Digital (WDC), and Intel (INTC) are leading the stock market’s latest leg higher.
