If you paid any attention to tech earnings this week, you probably noticed that Big Tech’s master business plan seems to consist entirely of firing a cash cannon at anything involving the word “datacenter.”

Overall, Microsoft, Meta, Alphabet and Amazon are expected to spend over $670 billion in capex this year alone—up from $410 billion last year—and maybe even as much as $725 billion. Here’s each company’s spending plans for the year ahead:

• Meta increased its capex projection to between $125 billion and $145 billion, up from its prior estimate of between $115 billion and $135 billion.
• Microsoft told investors its capex spending will be roughly $190 billion. Prior analyst estimates were around $154.6 billion.
• Alphabet’s new capex is between $180 billion and $190 billion, up from its previous forecast of between $175 billion and $185 billion.
• Amazon told investors it’s expecting its own capex to land at around $200 billion, roughly in line with prior estimates.

Putting the Gemini in GDP

Big Tech’s data center habit has become so expensive, it’s actually meaningfully accelerating the economy, at least for now.

The Bureau of Economic Analysts revealed that US GDP grew at an annualized rate of 2% in Q1, up nicely from Q4’s measly 0.5% growth. Business spending (consisting mostly of AI infrastructure) accounted for 1.5 percentage points of growth, while consumer spending fell from 1.9% in Q4 to 1.6% in Q1, with Americans feeling the pressure of rising inflation.

Big Tech’s spending on chips and data centers is an electric jolt for the US economy, which has been facing headwinds from the Iran war and a slowing labor market. The spending spree is creating tangible GDP growth, because it hikes up demand for construction infrastructure, energy, and chips.

But the problem is that these checks aren’t generating actual, tangible results from AI just yet. Silicon Valley’s logic is that AI will eventually become such a transformative force in society that all the investment will be well worth it. The flip side, however, is that all of this building could be a waste if the AI bubble bursts, bringing down not only the stock market, but the US economy as a whole.

The cherry on top: In the meantime, the spending stokes inflation, too. “While AI investment promises to reinforce organic productivity growth in the coming years, its near-term impact through increased capex, infrastructure buildout, and energy demand is likely to add to inflationary pressures,” explained EY-Parthenon Chief Economist Gregory Daco in a note today.

If all of this info has you feeling like Charlie trying to find Pepe Silvia, just think how the FOMC must feel. On the bright side, at least incoming Fed Chair Kevin Warsh will have plenty to do on his first day of work.—LB

🟢 What’s up

• Royal Caribbean rose 3.81% as it beat profit expectations, with demand rebounding to pre-Iran-conflict levels.
• Hertz jumped 13.84% after launching Oro Mobility, a new affiliate, to handle its growing robotaxi fleet in partnership with Uber.
• Eli Lilly surged 9.81% as strong demand for Zepbound and Mounjaro drove a major earnings and revenue beat.
• Chipotle gained 2.99% after posting a surprise same-store sales increase, though management tried to keep shareholder expectations low.
• Caterpillar climbed 9.88% as it raised its full-year revenue forecast on strong AI-driven demand for power equipment.
• Qualcomm advanced 15.12% on a solid earnings report supported by data center momentum and improving smartphone demand.
• Blue Owl Capital rose 9.8% after revealing it has made roughly 10x its investment in SpaceX.

What’s down

• Meta Platforms dropped 8.55% after signaling a sharp increase in AI-related spending, with rising input costs weighing on sentiment despite an earnings beat.
• Microsoft fell 3.93% as hefty capital spending guidance overshadowed strength in its Azure cloud segment.
• Stellantis dropped 5.33% as investors focused on messy underlying results despite a headline earnings beat.
• KLA Corporation slid 3.63% as strong results and guidance failed to meet elevated expectations.
• Ford declined 1.31% as weak forward guidance offset a strong quarterly profit beat.

Everyone knew rising oil prices triggered by the war in Iran would push inflation higher. What we didn’t know was how bad it would be—until today, when we got the March PCE reading, our first full-month look at inflation since the conflict began on February 28.

• PCE rose 3.5% over the last 12 months, its highest annual reading since August 2023, and well above February’s reading of 2.8%.
• Core PCE, which strips out volatile fuel and food prices, climbed 3.2% annually, its highest level since November 2023, and above last month’s 3%.

None of that is good news, and the fact of the matter is that things are probably going to get worse before they get better. The average gas price in the US is $4.30 per gallon, $1.32 higher than it was before the war began, and the longer the conflict continues, the higher those prices will climb, sparking further inflation. Meanwhile, the Fed is content to let the effects of the war play out in the economy without stepping in—at least until Kevin Warsh takes the helm, when he is widely expected to kick off a new regime of easing monetary policy.

Then again, he may not need to cut rates. Employment, the other half of the Fed’s two-part mandate, looks steady: Only 189,000 Americans filed initial unemployment claims last week, the lowest level since 1969. In fact, several members of the FOMC made it clear yesterday that rate hikes are still very much on the table.—MR

Brent crude just hit a four-year high, inflation fears are creeping back in, and consumers are starting to feel the squeeze. That puts credit card companies on the spot, which rely on steady spending to drive transactions—so let’s take a look at how they’re holding up, and what comes next.

Visa and Mastercard—two S&P 500 heavyweights (15th and 21st by weighting, respectively)—just reported earnings:

• Visa set the tone with a clean beat after the bell on Tuesday: Revenue jumped 17%, with US payments volume up 8%. Even more notably, cross-border volume climbed 12%—a key growth driver for the company and a closely watched indicator of global travel demand. Shares popped 5.7% on Wednesday, though they gave back 1.5% today.
• Mastercard posted better-than-expected earnings today—unsurprising, given it hasn’t missed an adjusted EPS estimate since 2020—with revenue up 16% and purchase volume rising 9%. But the stock still fell 4.25%, as higher-than-expected expenses weighed on sentiment.

The road ahead

Despite the war in Iran and the subsequent inflationary spike in prices, consumers continue to spend, helping these companies hold up relatively well. But they’re facing a different kind of challenge: Stablecoins are emerging as a real threat to traditional payment networks, offering merchants lower fees and faster settlement—two advantages that could chip away at the dominance of Visa and Mastercard.

But both companies are moving to adapt to, rather than be disrupted by, the shift. Mastercard has been building out its crypto capabilities, including a March deal to acquire stablecoin payments company BVNK for up to $1.8 billion, alongside expanded partnerships with firms like Circle and Binance. Visa is making a similar push, investing in its payments infrastructure with stablecoin- and AI-driven tools.

Looking ahead, both remain cautiously optimistic. Mastercard expects the Iranian conflict to hit hardest in the second quarter and guided for revenue growth at the low end of its forecasted range, though it still raised the high end of its 2026 outlook. Visa also lifted its full-year guidance and expects consumer spending to remain stable despite near-term uncertainty.

So, while macro concerns have weighed on sentiment, pushing Mastercard down 11.88% and Visa down 5.87% this year, the underlying spending data remains solid, suggesting a pullback could look more like an opportunity.—SY

• Enjoy some schadenfreude reading about how the titans of Silicon Valley built—and then tanked—their very prestigious school.
• The Bank of England and the European Central Bank both held interest rates steady today amid the economic fallout from the Iran war.
• Private equity giant KKR has raised $10 billion to launch a new AI infrastructure startup.
• Gemini just got a key regulatory approval to move forward on its expansion into derivatives.
• Boaz Weinstein's Saba Capital won a shareholder vote to take control of a UK investment trust with a large holding in SpaceX, bringing an end to the activist saga.
• Senators just voted to ban themselves from prediction market trading. Hopefully this will be more effective than our self-imposed ban to stop buying ourselves little treats.

Economic reports: It’s all about manufacturing tomorrow, with the ISM manufacturing reading and the final S&P US manufacturing PMI report.

Earnings announcements: The spotlight turns to the oil industry, with reports from Exxon Mobil and Chevron leading the way. We’ll also hear from Linde, Colgate-Palmolive, Estée Lauder, Moderna, and Dominion Energy.