Microsoft and Alphabet report earnings after Wall Street closes on Wednesday, in the biggest test yet of whether the artificial intelligence boom can justify the enormous spending behind it. The results arrive at the end of a packed 48 hours for markets that also includes the Federal Reserve’s rate decision and the UK Budget. Technology shares led Tuesday’s Wall Street gains, with the Nasdaq Composite climbing 1.2 per cent, after Broadcom disclosed that a group of banks would provide $63 billion in financing for the purchase of its chips and networking solutions, to be leased to Anthropic. Broadcom gained 4 per cent, Advanced Micro Devices climbed 5.5 per cent and Micron Technology rose 2.8 per cent.
The monetisation question
“Investors want to see how these two mega-cap tech stocks are monetising their AI investments,” XTB director Kathleen Brooks told Reuters. “These results could determine if the tech/AI rally has legs. Any signs of a failure to monetise investments, or a slowdown in capex spend, could have big repercussions for the AI trade on Wednesday night and Thursday.” The stakes are high: Anthropic’s S-1 filing this week disclosed more than $500 billion in multi-year compute commitments across Amazon, Google and Microsoft, and a series of AI-related funding announcements from Meta, SpaceX and Broadcom this week has breathed new life into the AI trade. Investors will scour the Microsoft and Alphabet reports for evidence of returns that justify the hefty build-out costs.
Asia sets the tone
Asian markets have already signalled optimism, with South Korea’s Kospi surging more than 6 per cent after SK Hynix’s record results and Japan’s Nikkei rallying about 1.1 per cent. Samsung Electronics surged 9.1 per cent ahead of its own third-quarter earnings on Thursday. But with the US 10-year Treasury yield above 5 per cent and oil back above $115 a barrel, the day’s big tests arrive with borrowing costs already uncomfortable — and any disappointment after the bell could quickly reverse the week’s gains.
