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The last time tech's hyperscalers addressed Wall Street, three months ago, they announced plans to collectively spend well over half a trillion dollars this year to build out their artificial intelligence infrastructure. That was before the U.S. invaded Iran, causing oil prices to spike, and leading to a dramatic slowdown in production of helium, which is crucial to semiconductor manufacturing. Meanwhile, the global memory crisis has worsened, forcing tech giants to pay up for the capacity needed to satisfy their data center ambitions. But pay for it they will. With Anthropic's Claude models and coding tools growing at historic rates and services like OpenAI's ChatGPT and Google's Gemini continuing to gain popularity at home and in the office, the world's most valuable tech companies have shown no signs of pulling back on the buildouts they say are needed to meet seemingly insatiable demand for compute resources. Now they have to level with investors on what it all means for spending, profitability and cash flow. And they'll be doing so within minutes of each other. Alphabet, Amazon , Meta and Microsoft are all scheduled to report quarterly results after the close of trading on Wednesday, just over two months after the U.S. and Israel launched joint attacks on Iran. Despite a roughly 50% jump in oil prices since the start of the war and an almost 80% increase this year, the group has held up well on Wall Street, with only Microsoft down for the year. Ted Mortonson, tech strategist at Baird, described the market as being in a "complacency phase," with investors betting that President Donald Trump will back down in the Middle East and that disruptions will be temporary. He called it the "TACO trade thought process," referring to the shorthand for Trump Always Chickens Out. But Mortonson is personally very concerned, in part because investors are showing none of the "fear panic and capitulation" he saw during the dot-com bust in 2000. "This is probably one of the most mispriced cycles I've seen in my career," Mortonson said.
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Analysts aren't projecting any massive swings in capex forecasts for the year. For Alphabet, Amazon and Meta, average estimates, according to FactSet, are all within range of guidance provided in January. Microsoft didn't issue capex guidance, but analysts on average expect growth of 66% in the fiscal year ending June to $107.5 billion, the lowest among the hyperscalers. In Amazon CEO Andy Jassy's annual letter to shareholders earlier this month, he defended his company's plans to spend $200 billion this year, a more than 50% increase from 2025, writing that, "We're not going to be conservative in how we play this." He made no reference to the war in Iran or higher energy prices. And Brad Smith, Microsoft's president, told CNBC's Power Lunch in March that, "When you have more demand than supply, you need to grow supply." Amazon Web Services has no plans to raise prices despite confronting increased costs, according to a person familiar with the matter who asked not to be named while discussing internal strategy. Analysts at KeyBanc wrote last week in a preview to Microsoft earnings that two of the things they're focused on are the "impacts from the Middle East" and "impacts from memory pricing on the cloud." The analysts, who recommend buying the stock, noted that their "checks and survey results entering the print are mostly positive." In an Amazon preview, KeyBanc analysts said they expect revenue to meet estimates, "with some downside risk to operating income due to the Middle East and gas." They have the equivalent of a buy rating on that stock, too. Citizens analysts wrote in a report on Meta last week that it expects the social media company to increase capex guidance for the year, citing its recent billion-dollar data center deals. Meta attributed plans to cut 10% of its workforce, roughly 8,000 employees, to its costly AI initiatives, telling staff in a memo on Thursday that the layoffs represent "part of our continued effort to run the company more efficiently and to allow us to offset the other investments we're making." Meanwhile, Microsoft told employees on Thursday that it would offer voluntary buyouts. Around 7% of its U.S. workforce, or 8,750 employees, are eligible, said a person familiar with the plan.
'Great deal of uncertainty'
One key question investors are asking is whether the rise in oil prices, along with the memory shortage, will factor into forecasts, or if the companies have enough levers they can pull to mitigate the effects. The soaring cost of oil is boosting the price of diesel, which has jumped about 42% since the start of the war in Iran, according to data from the U.S. Energy Information Administration. Data center operators pay hefty fees for transportation and manufacturing, which are impacted by higher fuel prices. AI chipmaker Cerebras said in its IPO prospectus earlier this month that data center power charges take up "a significant portion" of the company's operating expenses. In March, Iranian attacks damaged a liquified natural gas plant in Qatar that makes helium, halting production. The U.S. Geological Survey estimates that before the war Qatar produced more than one-third of the world's helium supply. Sulfur, another chemical that companies count on for chip production, has also become more expensive because of concerns about shipments through the Strait of Hormuz. Tanker traffic through the strait remains very low during a fragile ceasefire agreement between the U.S. and Iran. Baker Hughes, one of the most influential oilfield drillers in the world with extensive business in the Middle East, said last week that it's working under the assumption that the strait may not fully reopen for months. "There's still a great deal of uncertainty regarding, ultimately, the duration and depth of the conflict," CFO Ahmed Moghal told investors on the company's first-quarter earnings call. If global prices for liquified natural gas continue rising as they have since the attack in Qatar, electricity rates to power data centers are also likely to shoot higher, said Benjamin Lee, a professor of electrical engineering and computer science at the University of Pennsylvania.
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