I’ve long held one core belief when it comes to markets: Price is truth.
By that I mean that each day, a stock’s movement is trying to tell investors a story. Over time, those stories begin to paint a fuller picture.
Of course, the stories aren’t always precise. Why does a stock get hammered or rip higher when an earnings report surprises one way or another? It’s because the story those in the market told wasn’t 100% accurate.
The harsh reactions to the early batch of tech earnings are testing my patience with this belief in markets. I fancy something is off when markets react as if increased capital expenditures related to artificial intelligence are a horrible thing.
I am seeing the use cases up close. I am seeing AI being monetized. And I am not hearing of any slowdown in AI investment — in fact, quite the contrary.
I have seen the AI promised land, and it is growing more lush by the day!
“I am absolutely convinced of the power of compute,” AMD (AMD) chair and CEO Lisa Su told me. “When I say I think AI compute equates to intelligence, why wouldn’t you want more intelligence? Of course you want more intelligence.”
Su added, “Now, the important thing is where is the return on investment for those investments? We are seeing the return on investments. I mean, the fact is, we are ramping our own AI usage within AMD very significantly month over month. And we’re seeing the productivity come back in just better products, more capable products, faster time to market. And that will come out as you look at the long arc [of technology].”
I had a similar conversation with Mastercard (MA) CEO Michael Miebach this week. Miebach is increasingly tapping into AI to build up fraud-prevention capabilities. He is also leaning into agentic commerce. It’s not a pipe dream — it’s an actual thing that is starting to happen on the platform.
Then there is the case of IBM (IBM). The company has had a terrible month, no doubt, amid a disastrous earnings warning. But the reason behind the earnings letdown is capital allocation to AI, not less AI.
“What’s new is right now … companies, given the AI investments that they are going to make, which I think ultimately will get monetized and valued, … are building out the infrastructure portfolio to support that future of the AI realization,” IBM CFO Jim Kavanaugh told Yahoo Finance.
Yet here we are, watching prominent tech stocks getting obliterated.
Alphabet’s second quarter capital expenditures came in at $44.9 billion, slightly above Wall Street forecasts of $44.7 billion. Full-year capex guidance was raised to $195 billion to $205 billion from $180 billion to $190 billion, with a “significant” increase seen for 2027, executives said on the earnings call.
