The market isn’t grading all Big Tech earnings the same — here’s why
In this Club Entry, CNBC Investment Club’s Paulina Likos and Zev Fima break down what really matters to investors following a series of earnings reports highlighting both strong demand for AI infrastructure and continued growth in spending. AI trading faces a big test this week as some of the major hyperscalers report quarterly results. Early reads were that Alphabet, Microsoft, Meta Platforms and Amazon were all doing well, but a more nuanced argument is taking shape beneath the strong headline numbers. Even as costs rise, especially for memory and other hardware components, hyperscalers are leaning into spending, signaling that AI-related demand is strong enough to justify higher investment levels. “No one is holding back because of high memory costs; they’re just willing to pay,” Zev said, pointing to the strength of underlying demand. In fact, total capital expenditures across the four companies increased meaningfully this fiscal year, increasing the risks around how and when those expenditures will translate into returns. But not all companies are viewed equally by investors. This debate underscores a widening gap between companies that can clearly make money from AI today and those who are still working to prove its payoff. “As long as investors see AI spending being followed by higher revenue growth and profit growth, they will be less likely to scrutinize that spending,” Paulina said. This difference shapes market reactions and could ultimately determine which stocks lead the next round of AI trading. The talk also explores where the biggest opportunities can be found, from the cloud and advertising to internal efficiency gains, and why a company’s ability to use AI in its operations can give it a unique advantage. For a complete list of stocks in Jim Cramer’s Charitable Trust portfolio, see here. When you subscribe to the CNBC Investing Club with Jim Cramer, you will receive a trade alert before Jim makes a trade. Jim waits 45 minutes after sending a trading alert before buying or selling a stock in his charitable foundation’s portfolio. If Jim talked about a stock on CNBC TV, he waits 72 hours after issuing the trading alert before executing the trade. THE ABOVE INVESTMENT CLUB INFORMATION IS SUBJECT TO OUR TERMS AND CONDITIONS AND PRIVACY POLICY, TOGETHER WITH THE DISCLAIMERS. NO CIVIL OBLIGATIONS OR DUTIES EXIST OR SHALL BE RESULTING FROM YOUR RECEIVING ANY INFORMATION PROVIDED IN CONNECTION WITH THE INVESTMENT CLUB. NO SPECIFIC RESULT OR PROFIT GUARANTEE IS MADE.
