AI Spending Surge Fuels Big Tech Earnings Momentum

Highlights:

• Earnings boost: Big US tech reports strong Q2 results, with the Nasdaq up nearly 15% YTD at the time of writing.
• AI surge: AI adoption now at 9% of US industries, driving cloud and productivity growth.
• Winners emerge: Oracle (NYSE: ORCL) revenue from cloud overflow up 1,529%, Nvidia profits up 59% YoY.

Earnings Season Wrap-Up

With Oracle Corporation (NYSE: ORCL) reporting last week, the second-quarter earnings season for major US technology firms concluded on a strong note. The results highlighted solid growth across cloud and artificial intelligence (AI), with the Nasdaq up nearly 15% year-to-date at the time of writing. The “big three” cloud providers — Microsoft Azure, Amazon Web Services, and Google Cloud — each posted annual revenue growth of around 25%.

AI Adoption Accelerates

AI continues to be the central driver of tech performance. According to the US Census Bureau, 9% of US industries now use AI, up from virtually zero just three years ago — a penetration rate that e-commerce only reached after 24 years. Applications range from personalised retail tools and automated call centres to AI-powered coding and digital advertising, with companies like Meta, Microsoft, and Google leading adoption.

Spending Boosts Oracle and Nvidia

AI investment has also triggered higher capital expenditure across big tech. Meta, Alphabet, Microsoft, and Amazon all raised their spending guidance, benefiting suppliers such as Nvidia, which posted a 56% jump in revenue and a 59% rise in profit. Oracle Corporation (NYSE: ORCL) also emerged as a significant winner, recording a 1,529% surge in revenue from cloud overflow clients and a 359% increase in its business backlog.

Opportunities and Risks Ahead

Forecasts for global AI spending have been lifted to US$375 billion in 2025 and US$500 billion in 2026, representing growth rates of 67% and 33%, respectively. While this underpins earnings momentum — with global tech earnings forecasts raised from 12% to 15% — risks remain. Margin pressures, semiconductor inventory overhang, and stretched valuations could temper future returns. Despite these challenges, big tech remains well-positioned to capitalize on AI, making diversification across the AI value chain an increasingly important strategy for investors.

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