Profits at the Magnificent Seven US technology companies are expected to rise by almost a fifth to $181 billion for the most recent quarter as they continue to invest heavily in artificial intelligence despite fears of a bubble.
Microsoft, Meta Platforms, Tesla and Apple will kick off fourth-quarter earnings next week, followed by Amazon, Alphabet and Nvidia.
Wall Street analysts expect the combined profits of the seven companies to rise 19 per cent year on year to $181 billion, a slowdown from the 34 per cent year-on-year growth achieved in the same quarter last year.
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Investors are pinning their hopes on hundreds of billions of dollars of AI infrastructure investments fuelling future profit growth as they seek to pick winners from the huge technological advances promised by AI.
The biggest spenders on AI infrastructure, Amazon, Microsoft, Alphabet and Meta, are expected to report combined annual capital expenditures of $443 billion for 2025. CreditSights analysts have estimated that figure will rise to $602 billion in 2026, with around 75 per cent of that spending expected to contribute directly to AI infrastructure.
The spending splurge is increasingly fuelled by debt. The push by AI hyperscalers to build data centres will need about $1.5 trillion of additional borrowing over the next five years and extensive funding from other sources, according to a JPMorgan analysis.
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Larry Fink, chief executive of BlackRock, the world’s largest asset manager, told the World Economic Forum in Davos, Switzerland, this week that there was no AI bubble.
“I don’t think there is any uncertainty about AI,” he said in an interview with Bloomberg Television. “I sincerely believe there is no bubble in the AI space.” However, he said there are bound to be some “big failures” from the technology.
Mark Zuckerberg wearing the Meta Ray-Ban Display glasses last September
CARLOS BARRIA/TPX/REUTERS
Earlier in the week, Satya Nadella, the chief executive of Microsoft, told the World Economic Forum that there could be an AI bubble if the benefits of the technology were not spread beyond technology firms.
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Tesla is the only Magnificent Seven firm expected to report a fall in profits for the fourth quarter, with analysts forecasting a 38 per cent drop to $1.6 billion as the company comes under pressure from intense global competition in the electric vehicle market and the loss of the US federal EV tax credit.
The Elon Musk-led company is expected to increase capital spending this year from around $9 billion in 2025 as it invests in the production of its own AI chip, Optimus robots and robotaxis.