This week we hear from Microsoft Corp., Meta Platforms Inc. and Apple Inc. The market will be most focused on artificial intelligence (AI) capital expenditures and what that might mean for future earnings per share (EPS) growth.
To say it’s more important than the U.S. Federal Open Market Committee (FOMC) meeting is an understatement.
Meta’s plan to invest up to US$65 billion on AI this year drives home the point.
Since Microsoft made the US$10 billion investment in OpenAI in January 2023, AI has been on fire. Meta has moved about 350 per cent, Nvidia Corp. has moved 640 per cent, and Microsoft a more modest 83 per cent.
What these companies say about the next few quarters and the pace of growth probably sets the tone for markets this year—valuations be damned!
We have noted for exchange-traded fund (ETF) investors that perhaps one of the best ways to invest in the theme is via the AIQ ETF that is up about 92 per cent ever since.
Several points in the past two years have seen some hiccups, but the trend of higher highs and higher lows continues. The August swoon dipped below the 200-day average for a few days, which possibly would have stopped people out.
So, what could go wrong? Enter cost competition for access to AI from Chinese startup DeepSeek. Reports overnight suggest that their app is among the top downloaded on Apple’s iPhone downloads.
It was inevitable that an event like this would happen, though few could forecast who and when, which makes being an armchair quarterback tougher than being Josh Allen this morning.
The message is that AI is going to be huge, and we are in the early days. For those under invested, use the opportunity to get in, for those heavily in the trade, HODL (hold on for dear life), it’s likely going to be a rough week until we hear from Meta and Microsoft.
Better hope they are all in! There is some froth in the market and U.S. President Donald Trump’s latest tariff threats are building.
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