Big tech earnings have shown that artificial intelligence has become a massive growth business for the biggest companies in the world. And it better be because they’re spending nearly $1 trillion per year on the technology, but will it pay off? Travis Hoium, Lou Whiteman, and Jon Quast discuss: - Big tech’s AI growth - Is the economy healthy or hanging on by a thread? - Market predictions - Stocks on our radar Companies discussed: Textron (TXT), Circle (CRCL), Apple (AAPL), Amazon (AMZN), Alphabet (GOOG, GOOGL), NVIDIA (NVDA), Microsoft (MSFT), Meta Platforms (META). Host: Travis Hoium Guests: Lou Whiteman, Jon Quast Engineer: Dan Boyd Disclosure: Advertisements are sponsored content and provided for informational purposes only. The Motley Fool and its affiliates (collectively, “TMF”) do not endorse, recommend, or verify the accuracy or completeness of the statements made within advertisements. TMF is not involved in the offer, sale, or solicitation of any securities advertised herein and makes no representations regarding the suitability, or risks associated with any investment opportunity presented. Investors should conduct their own due diligence and consult with legal, tax, and financial advisors before making any investment decisions. TMF assumes no responsibility for any losses or damages arising from this advertisement. We’re committed to transparency: All personal opinions in advertisements from Fools are their own. The product advertised in this episode was loaned to TMF and was returned after a test period or the product advertised in this episode was purchased by TMF. Advertiser has paid for the sponsorship of this episode. Learn more about your ad choices. Visit ⁠⁠⁠⁠⁠⁠⁠⁠megaphone.fm/adchoices⁠⁠ Learn more about your ad choices. Visit megaphone.fm/adchoices

Hyperscalers Are Going Into Hyperdrive

Motley Fool Hidden Gems Investing

# Full Transcript

**Podcast:** Motley Fool Hidden Gems Investing

## Transcript

If you thought the AI boom was ending soon, I have bad news for you. Welcome to Motley Fool Hidden Gems Investing. Welcome in, everybody. My name is Travis Hoy. I'm joined today by Lou Whiteman and John Quast. And as much as I would like to move on from the artificial intelligence story, guys, we have to talk about one of the crazier weeks that I can remember during earnings season.

On one day, we had Alphabet, Microsoft, Amazon, and Meta report earnings. Not even just a day, within about a 20-minute span. And John, the numbers were absolutely crazy. Alphabet was kind of the one that stuck out to me. 63% growth in their cloud business. And all the other companies are growing at astronomical rates as well.

We've talked about the AI spend, which is getting close to a trillion dollars per year in CapEx. The growth is phenomenal. But are we at this point where it has to be that good to justify these ever-larger numbers of CapEx spend?

Well, I mean, perhaps the most surprising development over the past week is that I am now the most bullish AI person in this room right now. But yeah, the growth is absolutely superb. And it is this good, Travis. I mean, we can talk about the money that is actually recorded as generated revenue, right?

But that doesn't tell the whole story. If you look at the remaining performance obligations, much of which are tied to their cloud businesses, and much of that is related to AI spend. You look at Alphabet, Amazon, and Microsoft. The RPO is at $460 billion, $364 billion, and $625 billion, respectively.

So somewhere around $1.3 trillion. And just to be clear, RPO, remaining performance obligations, is like Anthropix signs a big contract for compute that would go into RPO. Is that right? I mean, it could be Anthropix. It could be anybody who's going to spend money on the cloud over a certain period of time, right? The money that you use today, that's generating revenue, but you're going to spend more tomorrow at a locked-in contractual price or whatever.

But these three companies, over just the last three months, have added $567 billion to the RPO. In just the last three months, we're talking about nearly $200 billion a month in spending commitments for the cloud, for the three largest cloud companies in the world. We can't comprehend a number such as that. Yeah, Lou, I generally agree with John. I mean, let's just talk top line first. We'll get to some of the ROI things in just a second.

But it is incredible to see these companies that are the biggest companies in the world report growth numbers that you would normally associate with much smaller companies operating from much smaller revenue bases. Yeah, it's insane. And look, part of this, RPO is not revenue, right? We all know that. And part of this is a land grab. I better reserve my place now because everybody wants it. A lot of it is wiggly, right?

If things change, you can adjust...

Hyperscalers Are Going Into Hyperdrive

Transcript

Built for investment professionals

Every day you wait, your competitors are finding
edge in conversations you're not hearing.

Hyperscalers Are Going Into Hyperdrive

Transcript

Built for investment professionals

Every day you wait, your competitors are findingedge in conversations you're not hearing.

Every day you wait, your competitors are finding
edge in conversations you're not hearing.