Tech Check

AI Boom Faces Reality Check

As US tech giants report quarterly results this week, investors are watching for signs of whether the AI boom is delivering real returns or inflating a stock bubble.

Reporting schedule of big tech:

• Microsoft, Meta, and Alphabet have earnings out on Wednesday.
• Apple and Amazon report on Thursday.

Nvidia, the most valuable company on Earth and one of the key drivers of the AI buzz, won’t join the tech week. It has its earnings out on 19 November.

Trillions Later, Fundamentals Under Scrutiny

Big US tech companies have added trillions of dollars to their combined market value since ChatGPT's release in November 2022.

The Nasdaq-100 index, which tracks most major tech companies, has climbed more than 115% since then.

To justify the sky-high valuations, investors expect a solid earnings season.

AI Spending Tests Margins

All tech giants, except for Apple, are forecast to hit double-digit revenue growth — with Meta leading the pack. But profit growth is set to slow as expenses rise.

• Major cloud firms are expected to spend $400 billion on AI-related investments this year, with the figure likely rising in the coming years.
• This includes high-performance GPUs, custom chips, and more state-of-the-art data centers to support large language models and generative AI tools.

A recent MIT study found only 5% of AI projects delivered measurable gains, so the pressure is on tech companies to prove the doubters wrong.

AI Push Triggers Layoffs

Amazon provided an example of the AI disruption, by announcing 14,000 corporate job cuts on Tuesday. This was less than the originally reported 30,000 jobs, but the company signaled more layoffs may follow.

• AI adoption is driving automation and cost-cutting across divisions
• Affected teams include AWS, Prime Video, devices, and HR
• CEO says AI tools reduce management layers and routine roles

The layoffs offer a glimpse into how AI may reshape tech workforces.

Despite fears of an AI bubble, demand for cloud services remains high — even amid capacity constraints. AI adoption may have been slow so far, but it is expected to accelerate. This week's tech earnings will give us a clearer picture.