August Market Insights: Most Expensive Earnings Season Yet
The Most Expensive Earnings Season Yet
At this point, I could write the same opening every earnings season. Big Tech spends more than anyone expected, a handful of stocks get crushed for it anyway, and a handful get rewarded for doing the exact same thing. That was the story in January. It was the story again in the spring. It was the story again this summer, just with a bigger number attached every time.
Everyone's All In
The AI buildout isn't slowing down. The biggest tech companies are on pace to spend over $750 billion this year alone on the chips, data centers, and power hookups the AI boom runs on. Nobody wants to be the company that ran short on computing power in the middle of the biggest shift the industry has seen in a generation. So everybody keeps spending, whether or not they can say exactly what it earns back yet.
Same Bet, Different Grade
Tesla, Alphabet, and Meta all reported some of their best numbers in years this quarter. Record deliveries. Record cloud growth. Record ad sales. All three stocks got hit hard anyway, in the same week, some by double digits. Investors weren't worried about growth. They were worried about the size of the checks being written to chase it, with no clear sense of when any of it comes back.
Microsoft and Amazon spent just as aggressively and walked away with the opposite result. Both stocks jumped, because both companies could point to something concrete: cloud growth that wasn't just strong, it was accelerating past what anyone expected. The chip world told the same story. Micron beat expectations and popped. SK Hynix posted the best quarter in its history and still got punished, because even a great number can look disappointing sitting next to an even bigger one Wall Street had already priced in.
It's Not Just the Big Guys
The spending spree isn't staying inside a handful of balance sheets either. Memory chips have gotten so scarce that Apple raised prices on laptops and tablets rather than absorb the cost itself. Meanwhile, the companies making the power and cooling equipment that sits between a new power plant and a working data center are having a much easier time than the hyperscalers writing the big checks. They tend to get paid either way. Chips, memory, and power all had a good quarter. The companies footing the biggest bills didn't always get the same treatment.
The one report still left to come may be the biggest of all. Nvidia hasn't posted its own numbers yet, and what it says will shape this whole story more than anyone else's results have. Until then, the lesson from this earnings season is the same one from the last two. Spending big on AI isn't news anymore. What actually moves a stock now is proof, and that bar only seems to be getting higher.
As always, reach out with questions about what any of this means for your own portfolio.
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