A crucial week for the four big tech giants: Focus shifts from revenue and profit to AI investment monetization

[Financial News, New York and Seoul = Lee Byung-chul, Park Jong-won] The benchmark for judging the AI investment race has changed. In this U.S. big tech earnings season, the market is paying more attention to capital expenditures, free cash flow and AI monetization strategies than to revenue and net profit. Cash flow and monetization plans now matter more than earnings.
Microsoft and Meta Platforms will report earnings on the 29th local time, while Amazon.com and Apple Inc. will follow on the 30th. They are all under scrutiny. Brad Worden, senior manager at Nomura Asset Management, said on the 26th, "Investors have begun to question whether existing business models can remain sustainable even after AI investment expands." He added, "The key is how much confidence they have in long-term investment returns."
This shift is also shaking investor sentiment toward the "Magnificent Seven," the leading AI stocks. These companies are expected to continue expanding AI investment, but the market is increasingly focused on their ability to generate cash and recover those investments rather than on the size of the spending itself. According to analyst forecasts compiled by Bloomberg, capital expenditures by Alphabet Inc., Microsoft, Meta Platforms and Amazon are expected to total about $724 billion this year and $950 billion next year.
For Meta, the biggest question is whether it will raise its capital spending outlook again. The key issues are how much it will expand its plan to build hyperscale data centers for AI model training and inference, and how it will monetize its AI investments. Microsoft must prove that the growth of Microsoft Azure, the core platform behind generative AI services, is strong enough to offset the burden of AI data center investment.
For Amazon, the main focus is whether revenue growth at Amazon Web Services (AWS), the world's largest cloud service, will return to the 30% range. The market is also watching whether it will further expand its annual $200 billion capital spending plan and whether AI infrastructure investment is translating into improved profitability at AWS. For Apple Inc., the key point is how clearly it can define its AI strategy.
Willy Lee of venture capital firm Neostella Capital said, "All of these companies are entering an aggressive AI investment race." He added, "The market will scrutinize their business performance and profitability much more strictly."
Meanwhile, about two weeks after SK hynix shares began trading on Nasdaq in the form of American Depositary Receipts (ADRs), local media raised concerns that the ADR price is too high. They argued that the gap between Korean shares and ADR prices is another example of overheated trading in AI-related stocks.
In a column published that day, James Mackintosh of The Wall Street Journal (WSJ) argued that "the enormous premium on SK hynix ADRs compared with the company's listed shares in Korea is something that should not happen in the market, and another sign of overheated AI trading." Since trading began on the New York stock market on the 10th, SK hynix ADRs have traded at a 16% to 51% premium to the Korean common shares. An ADR is a substitute security that allows a company to deposit shares issued in its home market with a U.S. bank and use them as collateral for trading on U.S. exchanges.
Mackintosh warned that if the company uses its U.S. shares like a piggy bank, it will take a hit. He added that it would suffer even more if semiconductor stocks plunge in both Korea and the United States and the premium disappears.
He also pointed out that the current premium cannot be sustained if U.S. investors can buy the cheaper Korean SK hynix shares, convert them into ADRs and then resell them at a higher price through arbitrage.
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