The financial report phenomenon of the Seven Sisters of Technology: The market does not care about how to make money, only how to spend money

Reprinted from: Wall Street News Recently, Microsoft, Google, Meta and Tesla, among the Seven Sisters of the US stock market, have successively announced their first-quarter results.
Among them, three companies reported profits and sales that exceeded Wall Street\’s expectations, while the fourth company\’s performance fell significantly short of expectations.
However, investors have little reaction to these direct financial results. They are more concerned about the future investment and spending plans of these four companies, not just their current profits.
Data shows that these four companies have a combined cash reserve of US$275 billion. This part of the funds can be freely used for various investments and the development of new technologies.
Overall, the demand for AI infrastructure is very strong. These companies have generally revised up their AI capital expenditures: • META: Full-year capital expenditures have been raised from 300-370 to 350-400 to build data centers to support AI business; • Google Google: It expects capital expenditures in each quarter of 2024 to be more than US$12 billion, with a year-on-year growth of at least 49% to maintain its leading position in AI infrastructure; Microsoft: stated that the demand for computing power cards exceeds the supply and decided to expand AI investment scale. Capital expenditures this quarter are 14 billion (expected 13.14 billion). Capital expenditures are expected to increase significantly quarter-on-quarter in the next quarter; these companies\’ statements on future spending plans directly triggered significant fluctuations in stock prices.
Meta, in particular, announced it will increase its investment in AI infrastructure by up to $10 billion this year.
The news caused its stock price to fall by 11%, the largest one-day drop since October 2022.
Although Microsoft has also invested heavily in the field of AI, its stock price has also been affected. However, it quickly recovered after announcing its financial results.
Dan Morgan, portfolio manager and analyst at Synovus Trust, said: Meta, Microsoft, Tesla and Google had a combined cash balance of $275 billion at the end of the first quarter.
Investors are putting pressure on these companies\’ use of cash. They are focused on how companies use their vast cash piles to make strategic acquisitions and whether they can get good returns on their investments.
Investors don\’t want these companies to spend large amounts of money on projects that ultimately don\’t come to fruition.
Some analysts pointed out that investors are paying close attention to the spending plans of giants. Part of the reason is that the investment decisions of these companies can directly affect the direction of the stock market.
According to data from S&P Dow Jones Indices, the Seven Sisters of U.S. stocks account for nearly 30% of the market value of the S&P 500 Index. And they have contributed more than 40% to the index\’s year-to-date returns.
Therefore, investors pay great attention to their every financial action and plan.
On the other hand, the reason is that investors are gradually losing patience in the face of weakening expectations for interest rate cuts by the Federal Reserve and overvaluation of technology stocks.
At the start of the year, markets were optimistic that the Federal Reserve could cut interest rates soon. But that optimism has waned in recent weeks as inflation data showed things were tougher than many investors expected.
At the same time, against the backdrop of continued high valuations of technology stocks, investors\’ patience is being tested.
Bob Doll, chief investment officer of Crossmark Global Investments, said: Investors have limited patience with highly valued technology stocks. They expect quick returns.
While the bull market in tech stocks remains solid, investors have made it clear they are raising the bar.
In the coming days, investors will turn their attention to the performance of the other members of the Seven Sisters.
Amazon is scheduled to report earnings next Tuesday. Apple will report on Thursday. And Nvidia will report on May 22.
In addition, they will also focus on the Federal Reserve\’s policy decision next Wednesday and Chairman Powell\’s press conference to assess the possibility of a rate cut in the short term.