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we've got more Tech earnings to discuss so much going on let's start with Mata whose shares jumped in extended trading
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Wednesday after the company Beat estimates of revenue and profit in the second quarter advertising Revenue 22%
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from a year earlier and the strength of that business seems to be offsetting concerned about heavy spending on AI
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which I think is necessary for them the AI spending will be increasing with meta
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uping its expected 2024 Capital expenditures to at least 37 billion we're done with the metaverse now we're
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spending the money on AI um meta shares did sync on AI spending news last quarter um the market seems more
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optimistic because they've got a really good business to get them there I guess um there's not still not a lot to show
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for these AI Investments and a lot of investors are worried about where the payoffs are um how long will investors
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wait to get a return from meta um and I'll just go through Microsoft earnings really quickly Microsoft was less
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they're less enthusiastic about those which were a m of bit of a mix bag overall sales and profit growth beat
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expectations in the latest quarter but revenue for the company's Cloud business roads 27% slightly below the prior
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quarter and analy expectation shares were down about 3% on Tuesday after the earnings report but rebounded for the
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most part the next day um so talk a little bit about that about the two companies
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thoughts there's just no denying it meta I mean meta their earnings were up their
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earnings per share were up 73% year on year their ad Impressions and average price per ad both increase 10% year on
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year I mean that's incredible the average price and the number of Impressions up 10% 3 and A4 billion
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daily active users so 40% of the planet is on a meta platform every day um the only thing that's giving anyone any
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pause and it depends how well they're positioned is they said they warned that capex growth for AI will grow
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significantly and they've said that the amount of compute needed to train llama 4 will likely be almost 10 times more
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than we used to uh what was used to train uh llama 3 and people are sort of when they get a little insecure about
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this they immediately go to similar to what they did in 99 when they went to Cisco they go to the infrastructure
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place because if you look at the capex for the software layer Microsoft meta Google and Amazon their capex is up 31%
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but their revenue is only up 19 whereas the hardware layer you know where you go
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first Nvidia AMD arm their Capa is actually flat even maybe down 8% depending on how you calculate it but
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their revenue is up 146% so it feels like a safer a safer play right now since reporting their
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earnings Microsoft and Google the software stack or part of the stack have declined 2 and 6% respectively when AMD
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reported it was up 8% but the the software layer although is that true meta was up but Microsoft was down but
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the thing that freaked everybody out on the Microsoft call was uh just their I think it was like they announced
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something like a 78% year-on-year increase in capex to 19 billion which is a staggering increase and get this the
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entire tech industry is in such a spending Street the capital expenditures of Amazon metam Microsoft and Google
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this year will be about $200 billion do that's double what the US government spends on homeland security I mean this
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is these numbers are just staggering they are they're staggering whether they're going to get the money back is a
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real question there's I think pretty much open AI is making money but who else is you know this this irritating VC
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I'm not even going to name them was was asking um I was having lunch with Sam Alman was asking like is any going to
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make money here essentially and I think everyone's worried about that is is this
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spending going to result in you know a growth that that that meets the amount of money they're spending I don't see
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they have another choice but to spend correct it's this is not the metaverse this is a really critical shift in
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Computing I don't know how they can't not invest this is I mean all systems are go here this is this is I mean as as
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much excitement as there was about the web even though the revenue is scanned relative to the investment it's
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dramatically greater than the revenue anyone getting from the web in the 90s so everybody is going Allin and also it
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plays to their strength in this in the sense that they already have a captive audience to to roll out AI applications
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to and also they've learned from the father that if you have the advantage of cheap Capital you leverage that
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advantage and you go hard at capex to try and pull away from everybody else so they're doing that they're like look our
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advantage is we have access to cheaper Capital because of our market cap and our PE so we are going to turn turn on
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the spending jots here's a fun stat 40% of S&P 500 companies discust AI in their
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earnings calls I mean for you know what is it only like 20% are tech companies so even non-tech companies are talking
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about Ai and their earnings calls that's up from 1% of them five years ago so this is this is a tital wave that is
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just sort of this is the tail wagging all dogs so money well spent or we don't know yet or impossible not to spend uh I
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think it's money very well spent for some players unfortunately existing players who are running away with it I
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do think there's a a jump on the band I I don't think I think a lot of analysts are going to say and I don't know if
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Nestle's doing this but I think a lot of analysts are going to say to some of these second tier or consumer
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companies okay rent Ai and spend money on it but you shouldn't be spending capex on it because I've heard about
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some companies are trying to develop their own llms and going very hard at this but the stat I've seen that just
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absolutely blew me away we tried to pull together there's some data on this is that if you look at the actual amount of
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Revenue that AI applications are generating right now you know open AI or chat gbt the subscription things like
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that it's about um $20 billion and it's inspired a market capitalization increase and this includes the amount of
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money that companies are spending on gpus but it's inspired a$3 trillion doll increase in market capitalization so
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right now the industry notionally is trading at 150 times revenues and that just does not feel sustainable that
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means the revenues these applications are garnering has to you know double every year for the foreseeable future
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which is a you know that's a big ask I don't see how they avoid this these spins I just don't see how they avoid
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them yeah it's an arms race they have to do it it's an arms race