Investors are bracing for Big Tech's AI spending bill as Microsoft and Google prepare to report earnings. The focus is on AI capital expenditure rather than revenue, especially with Anthropic's expected IPO next month. Tech bulls have had reason to cheer, with Nasdaq Composite futures pointing to a third straight day of gains.
Major players like Meta, SpaceX, and Broadcom have announced deals to raise about $200 billion for AI aspirations despite climbing borrowing costs. SK Hynix reported blowout earnings and said it had sold out of high-bandwidth AI memory through 2029, highlighting supply crunches across the memory market. In July, Google delivered solid profit but raised its capital expenditure forecast to as high as $205 billion, though shares tumbled on negative quarterly cash flow.
Microsoft shares have rallied since late July, emerging as a major beneficiary of the AI spending spree, with its bottom line surging on robust cloud demand. Unlike other hyperscalers, Microsoft has held the line on capex, estimating spending at roughly $175 billion for the year. The company also announced extending buyout offers to 60,000 employees, a quarter of its workforce, to offset costs as it proceeds with its AI investment push.
Investors will also watch the Fed, widely expected to hold rates steady but potentially increase in December, as the 10-year Treasury note yield rose to 5.01 percent, with concerns the AI borrowing binge risks pushing yields higher.
Source: New York Times Business · Summarized by HeadlinesBriefing