Equity futures are under pressure this morning as the market digests quarterly results published last night from Microsoft () and Meta Platforms (). Both companies posted consensus topping September quarter revenue, but both reaffirmed plans for higher capital spending in the coming quarters, joining Alphabet () in that endeavor. As Meta explained it is : “We anticipate our full-year 2024 capital expenditures will be in the range of $38-40 billion, updated from our prior range of $37-40 billion. We continue to expect significant capital expenditures growth in 2025. Given this, along with the back-end weighted nature of our 2024 capital expenditures, we expect a significant acceleration in infrastructure expense growth next year as we recognize higher growth in depreciation and operating expenses of our expanded infrastructure fleet.”While these increasing spending levels may lead some to ask fresh questions about the timing of AI monetization, examining the earnings reports from those three Big Tech companies as well as those from ServiceNow (), IBM() and others indicates that is already underway. In short, we see those findings and related signals, like the ones below, supporting our Artificial Intelligence model. As far as those increasing spending levels go, more demand for the companies inside our Digital infrastructure model is how we see it. The continued buildout of data center capacity also bodes well for another model we’re currently developing – more on that before too long. Quarterly results out this morning from Mastercard () will give us another look at the consumer and spending prospects for the holiday season. We suspect there will be at least some comments supporting our Cash-Strapped Consumer model as well as our Digital Payments during Mastercard’s earnings conference call. We’ll also want to dig into comments from Samsung () for its smartphone segment as well as its capital spending plans, which could influence the constituents of our CHIPs Act model. While best known for its smartphones and other connected devices, Samsung is one of the largest spenders on semiconductor capital equipment. The September quarter earnings fun will continue after today’s market close with Amazon () and Apple() on deck. Amazon should benefit as AI accelerates cloud adoption and its July 16-17 Prime Day event should support favorable digital shopping results. While the company tends to shy away from formal guidance, we’ll be parsing what it says about digital advertising and the 2024 holiday shopping season with an eye toward our Digital Lifestyle model. When it comes to Apple, expectations are all over the map for iPhone shipments but we continue to think that as Apple releases more Apple Intelligence capabilities through upcoming software releases, the expected iPhone upgrade cycle should materialize. Before we turn to the economic data coming at us today and tomorrow, we first have to discuss yesterday’s much stronger-than-expected . That along with the findings in the report from S&P Global (SPGI) suggests we are likely to see a much stronger October jobs report compared with the market consensus of 115,000 nonfarm jobs.If that is the delivered outcome, we could see the Fed telegraph a slower pace of rate cuts over the coming months, something the market is anticipating given the climb we’ve seen in the 10-year Treasury yield (see the graph below) and some shifting in probabilities found in the (Click on image to enlarge)Currently, that tool still shows the market penciling in two 25-basis point rate cuts for the remainder of this year. Now let’s see if this morning’s September PCE Price Index and the October Employment Report support that level of activity or point to a market having to once again revisit the expected pace of rate cuts. More By This Author:Bring On Big Tech Earnings Tesla & AI Comments Lift Stocks, But…The US Economy – Good For Earnings But…
Big Tech Digestion, Prepping For The October Employment Report
