Hyper Scale of Hyper Fail?

Welcome to the Schmoozeletter Blog. Your source for weekly water cooler wisecracks from the world of finance. If you have an opinion different than mine or a topic you want to hear about, let me know!

This week, we’re talking about:

Hyper Scale of Hyper Fail?

With all the hyperscalers reporting their earnings, let’s take a look and see who is crushing it and who will bankrupt themselves with too big of an AI spend.

Microsoft, Amazon, Google, Meta…

Let’s play…

Hyper Scale or Hyper Fail?

Microsoft – MSFT

Revenue was up 18%, and cloud grew 27%.

This, while still reeling from Elon’s sick diss of “MacroHard.” Man, does that guy suck.

At only 23 times forward earnings, this is one of the cheapest MSFT has been in years.

Verdict: Hyper Scale.

Amazon – AMZN

Revenue was up 20%, and their cloud grew 37%.

Bezos, you dog.

At forward earnings in the high twenties, AMZN is a little expensive, but not unreasonable.

Verdict: Hyper Scale.

Google - GOOG

Revenue was up 24%, and their cloud grew 82%.

Remember when ChatGPT was the death of Google?

Even after the big run-up in share price, forward earnings are under twenty. GOOG has absolutely crushed it over the past year and is growing so fast that it is still cheap.

Verdict: Hyper Scale.

Meta - META

Revenue was up 28%. Their cloud doesn’t get reported like the others, but with 3.6 billion people using their products daily, distribution is not a problem.

“Waaah, CapEx is scary.” – Wall Street

At only 16 times forward earnings, META is dirt cheap right now.

Verdict: Hyper Scale.

Take your pick. Buy any of the four, and ten years from now, you’ll think it’s silly how scared the market was about these AI hyperscalers dumping money into what is already generating huge returns for them.

Final Thought

A good investing rule of thumb is to buy highly profitable, rapidly growing companies when they are cheap.