What will Microsoft and Meta say on AI capex?
Every weekday, CNBC Investment Club with Jim Cramer publishes Homestretch, an actionable afternoon update just in time for the final hour of trading on Wall Street. The Federal Reserve left interest rates unchanged Wednesday afternoon following the conclusion of its July meeting. Unlike recent meetings, where markets had a strong sense of how the Fed would act, there was real uncertainty about what decision the Kevin Warsh-led committee would make. According to the CME FedWatch tool, a few minutes before the announcement at 14:00 ET, the probability of a rate hike was 29%. This uncertainty was also reflected in the voting; Three of the 12 Federal Open Market Committee members favored a 25 basis point rate hike. The market’s initial reaction was one of relief, with the S&P 500 and Nasdaq recovering much of their earlier losses and Warsh ultimately turning positive in his press conference starting at 2:30 PM ET. Warsh told reporters that the Fed “will not hesitate” to take action against inflation, which has been running above the Fed’s 2% target for years. “We will achieve price stability,” Warsh stressed, but it will take longer than the nearly nine weeks he has been president. Warsh said he would not tolerate inflation above target. “There is no soft inflation target. There is no soft implicit target.” Our colleagues at CNBC have a live blog with more of Warsh’s notable comments. We have a busy earnings night ahead with reporting from Meta Platforms and Microsoft. Capital spending on AI infrastructure is the No. 1 question on investors’ minds. What the two Club holdings say about how much they plan to invest this year and into calendar 2027 could significantly impact semiconductor and AI infrastructure stocks, and by extension, the broader market. Recall that last week Club Name Alphabet raised its 2026 capital spending outlook by $15 billion to a range of $195 billion to $205 billion. Additionally, Google’s parent company said it expects capital expenditures to increase significantly next year. It should have come as no surprise that Alphabet was increasing capital spending after the company completed a nearly $85 billion equity capital raise in June. Despite this, the stock took a penalty following the announcement but has recouped almost all of those losses over the last four sessions. Now let’s get back to Wednesday night. We expect Meta Platforms to raise its capex forecast given recent reports about its plan to build a cloud business and sell AI computing. Microsoft is seen as the wild card, although the capacity of its Azure cloud unit has been limited in many quarters. The big picture is that in a few hours we will see results from two more of the four major hyperscalers. Then on Thursday night we hear from the fourth Amazon. The recent decline in chip stocks is the market’s way of saying that capex will peak soon, and what hyperscalers have to say over the next few days will either confirm or refute that narrative. Elsewhere, we’ll get the latest update on Brian Niccol’s comeback when Starbucks reports earnings after the closing bell. Arm Holdings, Lam Research, Qualcomm, Chipotle, Fortinet and Carvana will also report. None of the companies in the portfolio report before the opening bell on Thursday. Some big names scheduled to report are Mastercard, Bristol Myers Squibb, Cigna, Quanta Services, Crocs, Solstice Advanced Materials and American Electric Power. On the data side, the June PCE Price Index and the first forecast for second quarter GDP will be announced. (See here for a complete list of stocks in Jim Cramer’s Charitable Trust.) 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 would wait 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 ARE RESULTING FROM YOUR RECEIVING ANY INFORMATION PROVIDED IN CONNECTION WITH THE INVESTMENT CLUB. NO SPECIFIC RESULT OR PROFIT CAN BE GUARANTEED.
