Capex is the number to look at amid Big Tech earnings

Amid a flurry of financial news, the U.S. Federal Reserve has announced a 25 basis point reduction in interest rates, a move anticipated by many traders. However, the Fed's Chair, Jerome Powell, tempered expectations regarding future cuts, stating that a further reduction in December should not be taken for granted. This statement had an immediate impact, leading to a dip in stock prices and an uptick in Treasury yields. In the realm of Big Tech, earnings reports from giants such as Alphabet, Meta, and Microsoft have surpassed analysts' expectations, showcasing impressive results on both revenue and net income. Notably, Alphabet achieved a remarkable milestone by exceeding $100 billion in quarterly revenue for the first time. The key takeaway from these earnings calls is the significant increase in capital expenditures (capex) planned by these companies. Alphabet has raised its capex forecast for fiscal year 2025 to between $91 billion and $93 billion, a notable increase from its previous estimate of $75 billion to $85 billion. Additionally, finance chief Anat Ashkenazi hinted at a substantial rise in capex for 2026. Meta has similarly increased its capex guidance for the year, raising the lower end to $70 billion from $66 billion. CEO Mark Zuckerberg expressed confidence in these investments, suggesting they would yield profitable returns. Meanwhile, Microsoft reported a capex of $34.9 billion for its fiscal first quarter, exceeding earlier expectations of $30 billion, with projections indicating a continued upward trend in spending. This surge in investment is largely driven by the escalating demand for artificial intelligence services, which shows no signs of slowing down in the near future. Concerns about a potential market bubble can be set aside for now, as the appetite for AI technology remains robust. As the day progresses, market observers are also keeping an eye on the upcoming meeting between U.S. President Donald Trump and Chinese President Xi Jinping, which carries significant implications for the trade relationship between the two nations. While both sides are optimistic, details about the discussions remain sparse, leaving some analysts cautious about the potential for meaningful outcomes.