This week brings a huge earnings test for AAPL, AMZN, GOOG, META and MSFT. I’m going to sell Microsoft out of my 12-18 month Jubak Picks Portfolio on Monday, April 27, ahead of the earnings report. That position is up 319% since I initiated it on June 14., 2018. I am keeping Microsoft in my long-term 50 Stocks Portfolio. That position is up 40% since I initiated it on January 18, 2022.
The Magnificent Seven stocks–Alphabet, Amazon, Apple, Meta, Microsoft, Nvidia, and Tesla–now account for about 35% to 40% of the market cap of the Standard & Poor’s 500 index.
Journey back with me to the heady days of 1999 when another technology boom pushed stocks to record highs on the promise of revolutionizing everything. Why is this exercise important?Because it’s a real life example of the work on the role of monopolies in our economy by economists like Joan Robinson and Paul Sweezy. Their work begins with the extreme excess returns that companies with effective monopoly power generate–and points to the important role that monopolies play in the business cycle of boom and bust. And because monopoly economics are critical to deciding if the current generation of AI stocks are really going to be worth what investors now say they are.
A week of Big Tech earnings reports will confirm or reverse what sure looks like a sector rotation away from tech shares and into metal and mining company stocks.
Prices for memory chips are forecast to soar in 2026. but what just as bad/even worse it looks like chip customers are looking at serious supply shortages during the year.
Higher prices and supply shortages could be enough to put earnings at risk at some high multiple cloud and AI companies.
No slowdown on plans for AI capital spending in earnings results this past week from Big Tech. Alphabet/Google (GOOG) said it was increasing what it planned to spend on A.I. data center projects this year by $6 billion, after spending nearly $64 billion over the past nine months. Microsoft (MSFT) said it had spent $35 billion in its latest quarter, $5 billion more than it had told investors to expect just a few months ago.
Amazon (AMZN) said it would be “very aggressive” in adding more data centers and would spend $125 billion this year-— and even more next year. Meta Platforms (META) raised its spending forecast to at least $70 billion by the end of the year, which would be nearly double what it spent last year. The stock market reaction wasn’t unalloyed joy. Investors seemed generally positive on spending plans from Alphabet, Microsoft, and Amazon. And skeptical of Meta’s strategy and spending.
Microsoft (MSFT) ended its fiscal year beating the top- and bottom-line estimates. For the fourth quarter that ended in June revenues came in at $76.4 billion, up 18.1% year over year and beating analyst estimates by $2.57 billion. Diluted EPS of $3.65 was up 23.7% year over year and beat analyst estimates by $0.27 a share. Operating margins came in strong at 44.9%, which represents an expansion of 180 basis points. The company also raised guidance. For Fiscal Year 2026 the company expects another year where revenues and operating income grow in the double-digits. Management projected Fiscal Year 2026 capital expenditures to moderate compared to fiscal 2025. Operating margins are expected to be flat year over year. But what’s especially impressive about the quarter to me is the balance between current growth and growth in the units that represent the company’s future.
For the coming fiscal year, big tech’s total capital expenditure on AI is slated to balloon, leaving the total for 2024 in the dust. In total, the four tech companies will spend more than $400 billion on capex in the coming year, according to the Wall Street Journal.
Microsoft (MSFT) is laying off slightly less than 4% of its global workforce—around 9,000 workers—in another major round of layoffs.
n May Microsoft (MSFT) announced that it will cut more than 6,000 jobs; today it was Procter & Gamble’s (PG) turn. The company said it will cut up to 7,000 jobs, or approximately 6% of its global workforce, in the next two years as the maker of Tide detergent and Pampers diapers struggles to reduce costs in the face of tariff uncertainty and rising consumer anxiety.
On Monday Microsoft told another 300 employees that their jobs had been eliminated. These cuts come on top of the 6,000 jobs cut in May. As of June 2024, the company had about 228,000 full-time employees, 55% of whom were employed in the United States.
In a week when Nvidia’s upcoming earnings report has all eyes on AI stocks, Microsoft (MSFT) has canceled some leases for U.S. data center capacity, according to TD Cowen.
OpenAI’s biggest backer has voided leases in the US totaling “a couple of hundred megawatts” of capacity—the equivalent of roughly two data centers.
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