From the studio

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Thought of the day

Nasdaq futures are pointing 0.4% higher ahead of the US market open on Thursday as the latest set of earnings from major tech companies pointed to continued demand for artificial intelligence (AI). A New York Times report that US President Donald Trump and Democratic Senator Chuck Schumer are moving close to a deal to avert another government shutdown is also supporting investor sentiment.

Ahead of the results from Apple later today and Alphabet and Amazon next week, both Meta and Microsoft reported earnings and revenue beats on Wednesday, ASML’s order intake nearly doubled, and Samsung Electronics posted record operating profits at its chip business.

Without taking any single-name view, these developments reinforce our confidence that AI will remain a key driver for equity performance. We also believe that AI beneficiaries will continue to broaden into the intelligence and application layers, as well as companies and sectors that can best utilize the technology to generate profits.

Higher capex points to durability in AI spending. Meta’s capex guidance for 2026 came in at USD 115-135bn, well above consensus estimates, while Microsoft’s quarterly capital outlays topped estimates. These higher-than-expected capital spending plans, together with ASML’s above-consensus revenue guidance, Samsung’s record profits, and TSMC’s positive outlook, all point to sustained demand for AI compute. Overall, ongoing AI spending globally should continue to support the AI growth story's momentum.

Robust demand should underpin further AI monetization. Although Microsoft’s shares slid 6% after hours due to slower growth at its cloud Azure division, we believe that the broader AI monetization trend remains robust, as the durability of demand is ultimately the key driver of financial performance over time. Notably, Microsoft’s management commented that Azure capacity remains constrained amid strong demand, and Meta’s management attributed higher capex primarily to cloud spending. Samsung officials also highlighted robust AI-related demand that could strain chip supply.

AI-driven productivity gains should accelerate as adoption rises. In addition to measuring AI monetization via cloud revenue growth, we are increasingly seeing evidence of productivity gains due to AI adoption. For example, Meta observed a 30% increase in output per engineer (and 80% for power users) since the start of 2025 thanks to the adoption of agentic coding, and management expects this productivity growth to accelerate. As in any innovation cycle in the past, we expect to see a performance handover from the enablers to the users, and companies that leverage AI to improve business outcomes should see tangible financial benefits. In our view, this means AI beneficiaries are likely to broaden not only to the intelligence and application layers of the value chain, but also to other sectors such as financials and health care.

So, we maintain our conviction that AI innovation will continue to drive equity returns in the coming years, and investors should broaden their exposure across the value chain.