Peter Cohan

Rising AI token prices are creating winners and losers. Chip designers and makers, Google, and enterprise-focused frontier model makers could be good bets.

Microsoft and Meta recently reported earnings, yielding starkly different market reactions. Microsoft's stock surged 9.8%, driven by its booming AI cloud business, Azure, which boasts external paying customers and strong growth. Conversely, Meta's stock dropped 10% as its AI spending is largely internal, lacking immediate external revenue to offset costs, compounded by significant operating losses from its Reality Labs VR division. Microsoft outperformed Meta in earnings, cash flow, and outlook, benefiting from a proven business model where AI capacity is rented to third parties, generating substantial backlog. Analysts see more upside for Microsoft, whose AI investments are already yielding tangible returns, unlike Meta's aspirational AI cloud and costly VR ventures.

Amazon's stock surged 11.5% in pre-market trading after its second-quarter results significantly beat expectations, largely driven by its Amazon Web Services (AWS) division. AWS reported a 37% revenue increase to $42.2 billion and a strong 39.4% operating margin, alongside a massive $496 billion contracted backlog. Overall revenue grew 20% to $200.61 billion, and operating income jumped 43% to $27.5 billion. Despite negative free cash flow and increased capital expenditure guidance, investors were optimistic, viewing the capex as an investment that will yield profitable growth as AWS revenue outpaces spending. Analysts see potential for 40% upside, though some bear cases highlight rising costs. The article notes Nvidia's superior performance in key financial metrics, as it profits from AI chip design while Amazon funds the AI infrastructure.

SpaceX stock plunged 11% pre-market and 49% since June, despite exceeding Q2 revenue and loss forecasts. The drop stems from significantly higher-than-anticipated AI capital expenditures, totaling $15.8 billion. While AI revenue grew 247%, the company failed most market tests for AI cloud providers, particularly regarding operating profit and a clear path from capex to returns. SpaceX's profitable Starlink unit saw average revenue per user decline, while its rocket launch and AI divisions remain cash-burning. Analysts are divided, with some predicting substantial upside based on its integrated platform, while others foresee further declines due to unproven achievements and upcoming insider share sales. Investors are cautious about the lack of financial guidance and the massive AI investment without clear returns.

SpaceX shares dropped 11% after its first public earnings report revealed an unexpected $18.4 billion surge in Q2 capital spending, primarily $15.8 billion for AI infrastructure. Despite beating revenue estimates with $7.81 billion and a lower-than-expected net loss, investors reacted negatively to the massive AI investment. While AI revenue soared 247%, the company recorded a $1.3 billion loss in its AI unit, failing key market tests for profitability and clear returns on AI capex. Its profitable Starlink unit saw ARPU decline, while launch and AI remain loss-making. The lack of financial guidance and upcoming insider share sales add to investor uncertainty, contrasting with successful AI investments by Amazon. Analysts are divided on future prospects.

Oracle's stock has declined 59% from its peak last September. Unlike rivals Amazon and Microsoft, Oracle fails investor tests for AI providers, passing only on revenue acceleration. In fiscal Q2 reported last December, the company fell short on revenue and free cash flow. Furthermore, despite beating expectations in fiscal Q4, the stock feel on investor balance sheet worries. Key risks for Oracle stock include OpenAI dependence, credit rating scrutiny and AI data center execution. While some analysts see potential, Oracle may not be the right stock pick for the latter half of 2026.

CoreWeave stock is rising as investors see a path to profitability with the company's adjusted operating margin rising from 1% to 5% and faster revenue growth ahead

CoreWeave stock surged 18% after its Q2 earnings, breaking a trend of post-report declines. The positive investor response stemmed from robust revenue growth of 112% to $3.45 billion, a raised 2026 outlook to $3.52 billion, and a substantial $104 billion backlog with $25 billion in new customer commitments. An improved 5% adjusted operating margin and strong demand for AI cloud services also fueled optimism. Despite significant concerns like $35 billion in debt, negative $5.7 billion free cash flow, and specific accounting practices, the bull case is prevailing. Investors are focusing on CoreWeave's ability to secure scarce Nvidia supply, convert it into long-term contracts, and its falling cost of capital, with demand still outstripping supply.

Nine top tech companies had $3.1 trillion of off-balance-sheet commitments mostly related to AI – roughly five times their $600 billion in capital

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