AI Spending In Focus for Meta, Microsoft Earnings

Summary

Gil Luria of DA Davidson previews Microsoft and Meta earnings, emphasizing that Microsoft's full-year CapEx guidance for fiscal 2027 is the key market catalyst. He remains bullish on Microsoft and sees discounted mega-cap tech bonds as an attractive safe bet. He also downplays China chip competition, arguing NVIDIA, Broadcom, and Micron will sustain high margins as data center build-out continues.

• Microsoft's FY27 CapEx guidance will reveal whether spending growth outpaces or lags Azure revenue growth, a critical signal for AI infrastructure themes.
• Microsoft is viewed as the 'responsible adult' that previously stepped back CapEx, so investors watch it closely for signs of a slowdown.
• Luria does not expect Microsoft to blink on CapEx, staying bullish into the report.
• Corporate bonds of Amazon, Microsoft, and Google trade at a discount and are seen as safe due to their creditworthiness and ability to halt spending and generate cash.
• Chinese chip competition is not a real threat to NVIDIA, Broadcom, and Micron, which should keep high gross margins as data center investments continue.
• The conversation hints at a broader shift in investment thesis from equity to credit for mega-cap tech, with bond discounts seen as attractive.