While we were all panicking about AI advancing to superhuman intelligence levels and becoming our evil overlords, it turns out the real problem is AI chatbots are too nice! OpenAI is rolling back a recent update that made responses from its GPT-4o model “overly supportive but disingenuous,” which goes against one of its 50 Laws of Robotics: don’t be sycophantic. I don’t know about you, but I prefer a little insincere flattery to AI models breaking most of the other 50 rules!
US stocks staged a Herculean comeback to finish positive yesterday. After starting the session battered by a double whammy of negative economic news and concerns about AI demand, the S&P 500 and Nasdaq 100 were each down more than 2% at their lows. But stocks managed to hurdle those challenges over the course of the day and accelerated into the close, perhaps buoyed by month-end rebalancing activity.
When the dust settled, the S&P 500 and Nasdaq 100 ended in positive territory, while the Russell 2000 had a 0.6% decline. It’s the biggest intraday loss the benchmark US stock index has erased to finish positive since October 13, 2022. That’s the day the bull market began.
Money printers go brrr
Meta and Microsoft each reported earnings yesterday, and both crushed it. It turns out that the businesses of selling advertisements and licensing software remain incredibly lucrative and powerfully profitable businesses.Â
Microsoft made $70.1 billion in revenue, with most of that coming from its two meat-and-potatoes businesses: the Azure cloud business ($26.8 billion) and its Microsoft 365, LinkedIn, and Dynamics segment ($29.9 billion).
Meanwhile, all the way down the Pacific coast in Menlo Park, Meta delivered $42.3 billion in revenue in the first quarter and earnings per share of $6.43, well above the FactSet consensus estimate of $41.3 billion in revenue and EPS of $5.23.
Back to Redmond, Washington, for a moment: while the cloud business had the biggest growth (up 21% year over year), the bucket of the business that includes Windows, Xbox, and Bing was still bringing in $13.4 billion.Â
All in all, these were two extremely successful money machines continuing to do exactly what it says they do on the box — turning advertising and software subscriptions into big, chunky earnings per share. If that were the end of the story, it’d be a pretty boring evening, but it wasn’t and the reverberation was felt across tech all night.
So, what’s there to worry about? More on that after the jump…Â
Energy Investors, Here Comes The Sun
Over the next three years, the IEA estimates that roughly 600 TWh of additional electricity will be generated from solar every year.1Â
To put that into perspective, Korea's entire population runs on about 600 TWh every year. Nations and corporations alike are attempting to find the balance between net-zero targets and expanding energy demands — with Big Tech companies already installing solar panels in their back gardens.
Investing in solar is a stake in tomorrow’s power. SolarBank investors are getting ahead of the shift.
As an established operator already powering 10,000+ homes (plus corporate energy transitions), an investment in SolarBank (Nasdaq: SUUN) could be your portfolio’s segue into renewable energy.
Making an ocean of money they can’t spend fast enough
But of course, both Meta and Microsoft have ambitions beyond hawking loud, autoplaying brand videos on Reels and Microsoft Office license keys. They want to be technologists, and to that effect are both spending oodles of money and throwing armies of engineers at generative-AI efforts under each company’s corporate umbrella.Â
Meta had full-year capex estimates cranked up from an already robust $60 billion to $65 billion all the way to a frankly eye-watering $64 billion to $72 billion.Â
That’s based on, in the words of the company, “additional data center investments to support our artificial intelligence efforts as well as an increase in the expected cost of infrastructure hardware.”
Up in Washington, capital expenditures for the quarter were $16.7 billion, up 52% year on year. Those chatbots are pricey!
So, a great quarter, but these firms are pot committed to a lot more chips (literally) going onto the table. Guess who’s the big winner there?
The Takeaway
Turns out the cutting edge is considered to be one of the more painful parts of the blade, and the frontier of computing is some of the most expensive real estate on the market.
The Best Thing We Read Today
Charting the reality of “sell in May and go away”
On the last day of April, it looked like traders were selling after a report showed first-quarter GDP contracted by 0.3%. But what if the sell-off was also related to investors getting ahead of the old adage that advises Wall Street to basically take the summer off and come back sometime in the fall?Â
Chartr’s David Crowther did the work and found there is indeed data to support the saying.
Off The Charts
Despite a postpandemic price surge, the costs of _____________ have leveled out to what they were 15 years ago.
Yesterday’s Big Daily Movers
It was a dark day for First Solar after its CEO sounded the alarm on tariffs
Beauty tech company Oddity, parent company of Il Makiage, is sitting pretty after crushing Q1 estimates, dodging tariff fallout
Etsy shares sank after the online marketplace topped revenue estimates but swung to a loss
Snap dropped partly because of how de minimis changes may hurt ad spending, though one analyst sees green shoots
Get More than a Seat at the Bar with This Opportunity
They went from a 40-seat “blink-and-you’ll-miss-it” bar in New York City to 7,500+ weekly bar visitors and routinely appearing in “best of” awards lists.Â
Now, Death & Co is expanding to Nashville, Vegas, and even Australia. Invest in Death & Co’s offering and lock in the current share price by May 15.3
What Else We're Snackin'
Ford says it’ll extend its employee pricing deal one more month… and then probably hike prices
Meanwhile, Stellantis and Mercedes-Benz both yanked their full-year guidance because nobody knows what’ll happen with tariffs
CEO Brian Niccol’s “Back to Starbucks” plans aren’t brewing a bold turnaround, but instead are grinding down profits
Super Micro’s massive sales miss is the latest headache for the volatile AI trade
Is it really just the earnings, stupid?* (*Markets Editor Luke Kawa admits his predictions may have been wrong)
Snack Fact of the Day
As much as 30% of Microsoft’s code is now written by AI software.
Events
April ISM Manufacturing IndexÂ
Earnings expected from Apple, Amazon, Eli Lilly, CVS Health, Estée Lauder, Hershey’s, Live Nation, Mastercard, McDonald's, U.S. Steel, Roku, Amgen, Riot, Airbnb, Reddit, Roblox, Sirius XM, and Strategy
1 See Electricity 2025 report for further details.Â
2 Stock markets are volatile and can fluctuate significantly in response to company, industry, political, regulatory, market, or economic developments. Investing in stock involves risks, including the loss of principal. Before investing, carefully assess whether a particular stock aligns with your investment objectives, risk tolerance, and financial situation.
3 The minimum investment is $1,003.94. Gin & Luck is the parent hospitality group of the cocktail brand Death & Company. This is a paid advertisement for Gin & Luck Inc’s Regulation A Offering. Please read the offering circular and related risks at https://invest.deathandcompany.com/.Â