Here are the takeaways from today’s Morning Brief. Sign up to receive the following in your inbox each morning:
If the summer was about AI ROI, or indeed the lack of AI, how much patience does Wall Street have for tech companies’ fall returns?
Judging by the rally in semiconductor stocks, investors waiting for details about where the infrastructure money will go and when new revenue will be generated will have to wait a little longer. A valuable asset is something that protects itself.
Chip’s name continues to rise as analysts demand clearer timelines from technology executives for envisioned AI transformations. Nvidia is once again threatening Apple as the most valuable company on the market. Semiconductor-related stocks have continued to rise, reversing the decline from August. This reflects strong demand for AI processing and infrastructure and ignores short-term concerns about ballooning capital spending. Pursuing your dreams costs money.
And investors are once again wondering where the limits are, and if they even exist.
The third quarter report is poised to test its limits with even more money at stake. The longer the capital investment hose remains open and the more intensely executives merge their identities with the AI wave, the harder it will be to turn back. Mega-cap tech companies are expected to spend $215 billion in AI capital spending this year, and another $250 billion in 2025, according to Goldman Sachs.
The slowdown in investment has not yet begun. But we’ll be looking for clues about how long AI’s growth will continue until companies’ whims, preferences, and future spending begin to manifest themselves on spreadsheets. It is only a matter of time before the envisioned productivity gains and “game-changing AI use cases” become a reality.
The tight symbiotic ecosystem that sells AI hardware suggests that once-strong fundamentals could become unstable as soon as Big Tech eases spending or pivots to other areas. I’m doing it.
The tech giant largely disappointed Wall Street last quarter. Meta was the only one who won by a landslide. While reactions to the earnings of Alphabet (GOOG, GOOGL), Microsoft (MSFT) and Amazon (AMZN) highlight how costly investments in AI can become, Zuckerberg said Wall Street The company has shown that it is not concerned about rising capital expenditures in all other areas. Business growth has exceeded expectations. It’s a high hurdle to clear. And without reliable income to supplement it, it’s going to become even more difficult as the expense side of the book grows.
Being aware of past risks is a virtue for those at the top of the corporate ladder. The same goes for suppressing bubble chatter. If the upward trajectory of semiconductor stocks is any indication, tech giants will continue to double down on their massive spending. That’s what you expect from tenacious leadership. Even if everyone else is waiting for answers.
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Hamza Shaban is a reporter for Yahoo Finance, covering markets and economics. Follow Hamza on X @hshaban.
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