💰 $700 billion capex isn’t enough

Big Tech’s big capital spending continues to surge even higher than the companies had previously expected.

Combined, Alphabet, Amazon, Microsoft, and Meta plan to spend more than $700 billion on capex in 2026, nearly double what they spent last year and $100 billion more than they’d predicted just last quarter, as they continue to build out the AI infrastructure to support their AI futures.

• The 2026 capex guidance for this group — which went up about $15 billion thanks to Meta and Google’s updates — has been a shorthand for Nvidia’s earnings outlook throughout the AI boom. That makes sense, as it’s one of the biggest suppliers to all four firms.

• On the surface, it’s difficult to see why Nvidia got clobbered to the tune of 4.7% after the Magnificent 7’s four hyperscalers reported earnings after the close on Wednesday. What gives?

• As the AI boom evolves, one reason being offered for Nvidia’s sharp sell-off is that its most important product — GPUs — simply aren’t the key missing ingredient right now. Rather, they’re something these companies are trying to do without while building up their own suite of offerings.

After a spike during Q4 earnings, hyperscalers aren’t talking as much about the OG brains behind the AI boom, but they are talking a lot about the hardware they’re bringing to the table, and nodding to the idea that escalating capex numbers are indeed a function of higher memory chip prices, rather than a more aggressive accumulation of GPUs.

The Takeaway

Of course, this is 20/20 hindsight: Nvidia — like every chip company — has been on an absolute heater since the market bottomed in late March. And to be clear, the chip designer’s sharply rising sales estimates strongly imply that hyperscalers’ hardware offerings are meant to augment, rather than replace, demand for the most valuable company’s products.

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Apple reported its second-quarter earnings Thursday, beating analysts’ expectations in its first earnings release since Tim Cook announced he’d be stepping down as CEO.

• The iPhone maker posted earnings per share of $2.01 (compared with the FactSet analyst consensus estimate of $1.95) on $111.2 billion of revenue (versus analysts’ expectations of $109.5 billion). Revenue was a record for the March quarter. Shares were down 0.4% shortly after the report.

• The company also delivered record Q2 iPhone revenue of $56.99 billion, compared with FactSet’s consensus forecast of $56.5 billion, as the iPhone 17 continued to perform well globally.

• Beyond hardware, Wall Street is keeping a close eye on Apple’s Services segment, which includes the App Store, iCloud, and Apple Music. Services have become the company’s most reliable growth engine and a massive booster to overall gross margins, especially as hardware sales face longer upgrade cycles.

“"Customer response to Mac Neo has just been off the charts"” Cook said in the earnings call. That’s one reason that Mac posted a record quarter on the metric of sales to new customers. Makes sense: we hear the guy running the hardware department over there is really going places.

The Takeaway

In China, where the company is on its way to becoming the smartphone market leader, Apple’s revenue was $20.5 billion, versus the Street’s $19 billion. Apple is expected to debut a foldable iPhone later this year — which could be another boost to its sales in China, the biggest market for foldable phones.

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With all the talk around ballooning data center spending and Meta’s AI ambitions — there were 49 references to “AI” on its earnings call yesterday — it can be easy to lose sight of what’s still at the heart of the Meta business: messaging, watching, liking, and doomscrolling across its core apps, which just shed 20 million daily active people.

What Mark Zuckerberg blamed it on

• 🏀 NBA: The first round of the NBA playoffs is coming to a close this weekend, sending half the teams in the tournament home after just one round. So, what have we learned so far? In the East, Boston’s chances of becoming the conference champion have increased by 5 points up to 48%* compared to the start of the playoffs, while Cleveland and New York’s chances have stayed pretty much flat at 24% and 18%, respectively. 

• 🏀 NBA: In the West, it’s Oklahoma City’s to lose, with traders now giving it a 68% chance of winning the conference.

• 🏒 NHL: Hockey too will see the first round of its playoffs wrap shortly, and while the Las Vegas Golden Knights have enjoyed the most robust pop over the first round (now up to 11% odds of hoisting the Stanley Cup), the teams seen as the likeliest winners include Colorado (31%) and Carolina (24%).

*Event contracts are offered through Robinhood Derivatives, LLC — probabilities referenced or sourced from KalshiEx LLC or ForecastEx LLC.

• Premarket earnings: Exxon, Chevron, Moderna, and Cboe