Motley Fool Hidden Gems Investing - Big Tech Earnings and Reckless Predictions

Episode Date: November 3, 2025

Five of the Big Tech Behemoths reported last week. What did we learn and what should we expect looking ahead? Rick Munarriz, Sanmeet Deo, and Tim Beyers: - Discuss macro takeaways from last week��s Big Tech earnings. - Dig into the details for the unusual news in each report. - Make a few reckless predictions of what’s to come from Big Tech. Don’t wait! Be sure to get to your local bookstore and pick up a copy of David’s Gardner’s new book — Rule Breaker Investing: How to Pick the Best Stocks of the Future and Build Lasting Wealth. It’s on shelves now; get it before it’s gone! Companies discussed: AAPL, AMZN, GOOGL, META, MSFT Host: Tim Beyers Guests: Rick Munarriz, Sanmeet Deo Producer: Anand Chokkavelu 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

What's the big deal with big techs? You're listening to Potly Fool Money. Welcome, Fools. I'm your host, Tim Byers. And with me is long-time Rule Breakers teammate Rick Benares, and my Supernova Odyssey teammates, Sanmiteo. Guys, how are we feeling today? You good? Caffeinated, I hope? Doing well. Very caffeinated.

Absolutely. Okay, very good. Today, we're looking back to look ahead with a review of last week's big tech earnings. But first, let's start with any macro themes you both saw from the big tech reports. And I'll kick us off with a couple things here. There seem to be three big prevailing themes. I pulled this from our internal AlphaSense tool. Relentless scaling of all of the AI cloud infrastructure. A big one on this, Microsoft will increase total AI capacity by 80% this year,

double its data center footprint in two years. That seems large. A bit of legal headwinds here. Apple has an antitrust lawsuit that they're dealing with. Then finally, capital intensity And boy, is there a lot of capital intensity. Amazon has a plan for 2025 cash capex guided to $125 billion. And that won't be the end of it. I mean, really? That won't be the end of it? Rick, what do you got for me here? What's going on here? Yes. So basically, you're having this great situation where, I mean, if you are a big tech company, where the rich keep getting richer. You continue to see the Mag7, or in this case, the Big Tech 5, whatever we want to call this group, continue to outpace the S&P 500, which

itself is outpacing the Russell 2000. If you're an investor and you were picking small stocks because you thought, oh, I got to start small, that's where the money is, it's been completely different. You're seeing, like with these big AI deals that are happening, they're just exchanging money amongst themselves, but they have the means, they have the money, and they have the resources to turn something as simple as AI years ago into something that's just basically a monster game-changing technology today. I mean, Samit, how do you see this, looking at the big tech landscape? What either surprised you or interested you coming out of these massive earnings reports last week? Yeah, so I'm kind of seeing like a bifurcated

economy where you have you know these big tech companies you know spending a lot of money making a lot of money and and really pushing for this ai stuff and they're you know in pretty strong positions to do so but then you have the consumer and consumer discretionary companies that are struggling you know you had chipotle which is a non-tech talk a little bit about you know some slowness and some weakness with their consumer amazon's talking a little bit about a squeeze consumer and their retail business so while you have the big tech companies thriving and spending you have the consumer you know maybe less so thriving and spending a little less so big big tech is uh is is big isolated at at the moment here yeah can i argue tim that

yeah is a tech company because how do they roll those burritos there's no way all that food fits into like a rolled tinfoil aluminum foil wrapped burrito i'm sorry that's that's magic that's wizardry i i i will tell you i think that guacamole is biotech in and of itself so i fully fully agree all right let's move on to the the earnings themselves and what we're going to do is focus on some of the outlier uh things that we saw in each of these reports and uh sammy why don't i start with you here on Meta. What really stood out for you? I'm really curious to dig in a little bit more on this joint venture with Blue Owl Capital. They announced that they're doing a joint venture to co-develop a Louisiana data center campus. And some of the structure and

the way they're doing this, it's going to be off balance sheet. And that always worries me. before. Yeah. That is something that I have experienced at a prior company was I worked, we had, you know, I, for those of you don't know, I worked at Lehman brothers and we had off balance sheet mortgage companies. So if, if I need, I say more. Yeah, that worked out great. I hope there's, there's less to this than it seems like this, this would be one of those that I'd like to just believe that what we're really going to get is just an interesting joint venture. But I really wish it was on the balance sheet. All right, Rick, let's keep moving here and go on to Alphabet. Alphabet had a heck of a quarter. And investors seem to like it. What did you like

or dislike? Yeah, I liked the fact. So here's a fear. And I have never shared it with you, Tim, or anyone. I sort of kept it internally because I didn't want this to happen. But every time I'm on Google and I put out a search result, I'm starting to get these nice AI responses giving me the answer I wanted. So I'm not clicking on ads. I'm not clicking on sponsored search results. I'm not clicking on anything. I'm not diving into all these companies that invested in SEO. And I tell myself, well, Alphabet has to feel the pain. They're going to feel this in advertising. They're going to feel this in other places. But they haven't. Again, $100 billion record quarter for the third quarter. And this was a year ago. There was some elections-related

spending on the ad market that could have propped up results. But the company's doing well. It's defying all these things. And clearly, just another major player in cloud that's really raking it in, in many different levels. Yeah. I mean, they are saying that backlog for their cloud business was up 82% year over year. That is extraordinary. And the backlog is apparently now 10X the current annual cloud revenue there. So maybe we're going to see some big things from GCP here. All right, let's move on to Microsoft, Sandmeet. What stood out for you here? Their other income swung to a $4.1 billion net loss from their stake in OpenAI. And that was surprising. You see some of the other companies, Amazon, Alphabet, making some money from their

investments in Anthropic. Microsoft, which has had a huge stake in OpenAI, has been involved with them from for a long time is not making any money yeah i mean i it's really hard to understand what exactly is going on here open ai is in full court press spend it all as soon as we get it mode and that is having some tail risk i guess for for microsoft it's it's a bit surprising They also absolutely went through the roof with their CapEx, $34.9 billion. That was up significantly, and about 50% of that's spent on GPUs. They have a big checkbook, and they're writing a lot of checks. But Rick, we mentioned before we got to this section, Amazon, $125 billion. What else can we say about Amazon? I mean, this was another amazing quarter

for these guys. Yeah, and amazing indeed. And when you see, oh, 13% sales growth, that's not very impressive until you realize that three years in a row, they've given us 9%, 12%, 11% growth. These back-to-back quarters of 13%, it may not seem like a lot, but Amazon is slowly, gradually starting to pick up momentum. It's like an old car that's just starting to pick up speed here. And you have the case here where it's international growth, obviously, is outpacing you. U.S. growth was 11%, international a little better. But obviously, AWS, their web hosting business, which is becoming a larger player, growing faster than the e-commerce business quarter after quarter. And more importantly, just margin-wise, it is such a cash cow, the way it

makes so much money, that it's helping the whole company. So, really a dynamic quarter that really defies the seemingly ho-hum top-line growth numbers. This is so interesting. There's two quick things on Amazon that I wanted to add to this, Rick. Yeah, I mean, you make a great point. Amazon re-accelerating is fascinating. They also had just a, you know, we just talked about, Sam Mead was talking about the OpenAI hit to Microsoft, and Scropic gave Amazon a $9.5 billion dollar one-time gain from revaluing that investment um that is extraordinary now that was non-operating income but um clearly the market thinks that anthropic is a whole lot more valuable but the most fascinating thing i thought was that uh for aws amazon decided beginning january of

this year to reduce the useful life of their servers and networking gear from six years the amount of time they used to depreciate their networking and server gear from six years down to five. That is very rare. You almost always see it, those useful lives being extended, not reduced. But that's telling you, I think, that Amazon is going to be spending a lot of money to keep refreshing its gear. All right. So, it's not just the workforce that's being reduced in no not just the workforce all right all right sam meet take us home with apple here oh if i may say one quick thing about amazon that i think is sometimes under underappreciated um with the whole big tech stuff is that they're the ones that has the deepest ties to retail and the consumer

and the data that they're getting from that and the way they're piecing together some of these like different businesses that they have is powered by a lot of that so it's almost like the retail is like a loss leader for all the other businesses that they're doing and i think they're putting together these pieces and i feel like sometimes they're playing 3d chess sometimes i mean you you might not be wrong it's certainly true that they are they are exposed to so many areas of the economy including to the consumer economy and then they're the biggest participant on the back end in this big tech ai cloud they they're the biggest player there so they stretch all the way across that value chain apple's no slouch though apple is a big big company

tell me what you thought about the the apple report you know apple is is it's interesting because tariffs are gonna definitely be an interesting part of of their business you know they do sell some of these phones phones is really the biggest business what i worry about with apple which is probably a lot of people worrying about is you know they're making commitments to investments as well but are they falling behind in the ai race and how are they going to be able to really capture the fact that everyone's walking around with with a device that could be have embedded ai that could really be powerful for them so um and it's something that they could create a service from their services business has grown for for many many years like they they always had the

hardware which no one else really had and then they added on services which started to you know really grow it's a hundred billion plus annual revenue stream growing faster than hardware so how are they gonna how are they gonna tie everything in yeah we don't have really good insight into what apple is going to do to get to get themselves to become a major player in the ai space everybody else is making really big portal investments and i really would have expect it by now that the Apple AI portal, which really is supposed to be Siri, would be better than it is. But it hasn't gotten there yet. All right. Coming up next, we're going to make some big tech reckless predictions. You're listening to Motley Fool Money. All right. We are back.

We're back with reckless predictions. And we call them reckless predictions because, I mean, we don't know. We make predictions, but we don't know. I mean, we're basing this on what we can see and what we can observe at the moment. And the whole point of making reckless predictions, and before I go to you on this, Rick, I'm going to kind of tee it up this way. The point of making a reckless prediction is to give yourself a frame for how you're going to look at a market. That's what you do a reckless prediction for. So you kind of have a sense of what you're looking for. And then when your reckless prediction goes wildly wrong and you see how it went wrong, then you start learning things. So it isn't the, it's great when we're

right, but it's also okay when we're wrong. So Rick, with that, you know, you don't have to be exactly right here, Rick, but give it to me, go crazy. What's your reckless prediction here? All right. I'm going to make a prediction that may not seem so reckless, but then I'm going to, embed a deeper prediction within it. I think that the Mag7, which is six tech stocks and a car driving stock that has a high in tech, so it's almost a big tech index. All five talks we talked about are part of the big Mag7, will be no more within the next three years. To me, this is an easy prediction because I remember when Fang was a thing and then Facebook changed its name and then Google changed its name. The letters didn't work. Then the end, you tell someone that wasn't

around 10 years ago and Fang was a thing, they may say, oh, and it's NVIDIA. No, it's Netflix. So everything changes over time. And I think you're sort of seeing that with the Mag 7, that it's this whole kind of thing that eventually it's not going to be 7. It'll be a smaller number, a different number. But my bigger prediction within that is that I think within five years, there is going to be a major player in AI that isn't even on anyone's radar right now. And no, I don't know who that is. I'm going to take the easy road out. But I see already that you're seen. I mean, NVIDIA, they have sort of an ASML-esque lead in AI, so I'm not going to say someone's going to topple them. But I think there'll be a major player then. You're sort of

seeing it happen just this past year alone. The reason why Chinese stocks like Alibaba and Baidu are doing so well is because they're filling a void in China of these AI chips and data centers that needs to be built out while there's trade tensions happening with the U.S. market. Not that I think one of these two will be the big leader, but it wouldn't surprise me if either an international name, or maybe an unlikely name that just happens to have a lot of resources. Maybe even the Apple that we were sort of ridiculing earlier on its inability to make it happen, that it's now even part of that Google Pixel 10 ad where it's like the middle-up pro, and they're making fun of it for not being able to have a good AI interface. Maybe Apple becomes

that major AI play, but I think it'll be unexpected, and I think it'll happen in the next five years i like it all right sam meet what do you got all right i think i think i have one that might be coming out of nowhere um so i talked a little bit about the bifurcated economy you have the tech companies with their their cloud businesses and their corporate businesses ai businesses doing well then you have cautious retail so one of those which you have amazon i think they're about to to unify both of those through their long-running joke of a cash burning business alexa which um they're rolling out alexa plus which are they're calling ambient ai strategy i think that might be successfully bridging the gap between consumer enterprise businesses where

ai will start managing users homes order their groceries book their services all powered by like aws ai and kind of creates a kind of a new brand new high margin subscription and services layer They'll kind of become Amazon's next little big line of business and they could help them get it to a valuation of $4 trillion. Okay. All right. That is a big prediction. All right. Mine may be fairly small then in the grand scheme of things here. I'm saying big tech R&D expense will start to scale faster than CapEx in the next three years. And just to put that in perspective, there are companies that have been nearly doubling their CapEx over the past couple of years amongst these big techs.

It has been outrageous. Alphabet, for example, I think was over 80%, just ridiculous. But I think the reason for this is simple. At some point, there's going to be a more pressing need for software-driven innovations in a number of areas. A lot of lower-level code work is going to be done with AI assistance, but experienced developers are going to get heavily involved, and they will be paid handsomely for the work. My embedded reckless prediction here, which I don't think is really all that reckless, but distinguished AI engineer is going to become a common title amongst Silicon Valley's big tech elite. If you've been around Silicon Valley and you know anything about that culture, Distinguished Engineer is something that is the title.

If you are a techie in Silicon Valley, becoming a Distinguished Engineer at one of those big companies, I think Distinguished AI Engineer is going to become a serious thing, and it's going to pay a lot, a lot of money. All right, coming up next, we're going to preview tomorrow's show. You're listening to Motley Fool Money. Don't you wish you could just hit skip on the worst parts of your life? You know, the same way you can skip an ad? I get it. I'm Siyaya and I live in Ice Cove. I've made some questionable decisions that didn't end up the way I planned.

And today I'm still figuring it out. Somehow things usually get worse before they get better. Apparently, that's how I roll. So bundle up and come along for the bumpy ride. Stream a new episode of North of North Tuesdays on CBC Gem. All right, coming up tomorrow, you will have Emily Flippen, Jeff Santoro, and Jason Hall talking about reformed rule breakers. How about that? I mean, I'm fascinated by that title already. So Jeff and Jason and Emily are going to be doing an earnings roundup. It's going to be a focused

on these reformed rule breakers, three different earnings takes for Spotify, Shopify, and a third mystery stock that we're going to let you tune into the show to get the reveal. But be sure you tune in tomorrow for Emily, Jeff, and Jason. And thank you for tuning in today for our big tech earnings review. Thanks to my friends, Rick and Sam Mead. As always, people on the program may have interest in the stocks they talk about, and The Motley Fool may have formal recommendations for or against. So don't buy or sell stocks based solely on what you hear. All personal finance content follows Motley Fool editorial standards and is not approved by advertisers. Advertisements are sponsored content and provided for informational purposes only. To see our full

advertising disclosure, please check out our show notes. For Rick Minaris, Sam Mideo, our engineer Here is Dan Boyd and our producer, Anand Chakrabartyalu. Tim Byers, thank you for tuning in, fools. See you again next time. Bluon.