Big Tech’s earnings season kicks off next week with a flurry of announcements from some of the industry’s most important players including Apple (AAPL), Meta (META), and Microsoft (MSFT). With the new year well under way, and AI still the hottest ticket in Silicon Valley, you can expect plenty of conversations about how companies are monetizing the technology and how much they spend on capital expenditures related to constructing data centers and producing new AI models.
And looming over all of that will be how newly-inaugurated President Trump will impact tech’s biggest trend in years. Whether it’s tougher tariffs, export controls, or more relaxed antitrust regulations, Big Tech will be keeping a close eye on Washington. And investors are certain to want to know what that means for companies’ bottom lines.
Trump already made his mark on the AI scene on Tuesday, announcing Stargate, a $500 billion AI data center company headed by Softbank, OpenAI, and Oracle (ORCL) that will see the trio construct data centers to power AI projects within the US. And on Thursday, Trump signed an executive order aimed at ensuring US dominance in AI.
It’s all going to make for quite an interesting earnings season, and it kicks off with Meta and Microsoft on Wednesday.
Investors and analysts will want to know how companies are working with the administration to ensure they don’t end up on the wrong end of Trump’s proposed tariffs on goods from China.
Apple (AAPL), whose CEO Tim Cook has a good relationship with the president, avoided tariffs during the first Trump administration and will look to do so this time around, as well. Amazon (AMZN), Apple, Google (GOOG, GOOGL), Meta, and Microsoft could also see less regulation around antitrust matters and a return to mergers and acquisitions.
There’s also the fate of the CHIPS Act. The legislation, passed under the Biden administration is meant to bring semiconductor manufacturing back to the US. But Trump has criticized the law, which provides billions in funding to chip makers, saying it was “so bad” during an appearance on Joe Rogan’s podcast ahead of the election.
Without the cash, Intel (INTC), TSMC, Samsung, and a slew of other semiconductor companies may not be able to complete their ambitious plans to build new chip making facilities. Look for word on how the likes of Intel and its competitors are navigating the new administration and whether it’s heard how it plans to address the CHIPS Act.
In addition to Trump, you can guarantee that virtually every tech company will mention AI revenue and spending. According to Jefferies analyst Brent Thill, Microsoft should report improved AI consumption and continued spending, something investors have been hoping for as the company works to meet customer demand for AI infrastructure.
During its prior quarter, Microsoft reported better than anticipated overall revenue and cloud and AI sales. But that wasn’t enough to satisfy investors, sending the company’s stock sinking 5% the day after the report.
Meta’s stock suffered a similar setback following its earnings last quarter, with shares falling after the company announced full-year 2024 cap-ex spending would increase from $37-$40 billion to $38-$40 billion.
Google and Amazon, on the other hand, won over investors with Google beating expectations on cloud revenue and Amazon improving overall margins.
Microsoft shares are up around 12% over the last 12 months, lagging the broader S&P 500, which has risen 26% during the period. Amazon and Google shares are up 52% and 35%, respectively, while shares of Meta have climbed 66%.
One of the biggest issues for Meta and Google is what Trump will do with TikTok. Both companies stand to gain users and advertising dollars if the short-form video app is banned in the US. But Trump is working with TikTok CEO Shou Chew to find a way to keep the app up and running, despite a law calling for it to go offline.
If Trump and TikTok can’t find a solution, the app might bite the dust, leaving its 170 million users, and the advertisers that want to reach them, with no place to turn than competing apps like Instagram and YouTube, which would be a boon for both companies.
But with Trump proclaiming that he’d “save” TikTok on the campaign trail, it will be hard for him to back away from keeping the app afloat. We’ll see what TikTok’s rivals have to say, if anything, beginning next week.
Email Daniel Howley at dhowley@yahoofinance.com. Follow him on Twitter at @DanielHowley.
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Source: finance.yahoo.com