Posts tagged ‘AAPL’
A.I. Field of Dreams
In the 1989 Academy Award–nominated film Field of Dreams, the lead character Ray Kinsella (played by Kevin Costner) hears a mysterious voice whisper, “If you build it, he will come.” Acting on blind faith, Ray builds a baseball diamond in the middle of his Iowa cornfield, risking financial ruin. Against all logic, the field draws a flood of visitors.
Today, a similar “field of dreams” is being built—not with corn, but with data centers. Instead of baseball players, it is artificial intelligence (AI) models, applications, and users who are coming.
The Market’s AI Momentum
The AI boom has already reshaped markets with all three benchmarks hitting record highs. Last month, the S&P 500 climbed +1.9%, while the NASDAQ rose +1.6% and Dow Jones Industrial Average surged +3.2%. Year to date, the indexes are up +10%, +11%, and +7%, respectively.
Behind this surge lies an unprecedented wave of AI infrastructure investment. Hyperscalers—Amazon.com (AMZN), Microsoft Corp. (MSFT), Google-Alphabet (GOOGL), Meta Platforms (META), and others—are pouring hundreds of billions into AI, much of it flowing directly to NVIDIA Corp. (NVDA), the undisputed leader in GPUs (Graphic Processing Units) powering the world’s AI engines. How large is the spending? NVIDIA CEO Jensen Huang estimates $3 trillion to $4 trillion will be spent this decade to fuel the AI revolution.
Source: Visual Capitalist
The Scale of AI’s Buildout
To put this into perspective:
- Amazon is projected to spend over $100 billion in 2025 alone, more than its cumulative capital expenditures from 2000–2020 combined.
Meta is constructing its $10 billion+ Hyperion data center in Louisiana—a sprawling 4 million sq. ft. complex across 2,250 acres, powered by a $4 billion natural gas plant. The footprint is so gargantuan it could cover much of Manhattan (see graphic below).
- xAI’s Colossus, a 750,000 sq. ft. data center in Memphis, Tennessee was completed in just 122 days—equivalent to building 418 homes in half the time it normally takes to construct one house (see slide below).
Source: BOND (Global Technology Investment Firm)
This breakneck pace of spending underscores the urgency and competitive pressure driving the global AI arms race.
The Origin of the AI Floodgates Opening
The spark was lit on November 30, 2022, when OpenAI released its LLM (large language model) called ChatGPT. Within two months, it amassed 100 million users.
Today, ChatGPT’s metrics have blasted much higher (see slide below):
- 800 million weekly active users
- 20 million paid subscribers
- $3.7 billion in revenue (as of April 2025)
Source: BOND (Global Technology Investment Firm)
But OpenAI is far from alone. Google (Gemini), xAI (Grok), Anthropic (Claude), Meta (LLaMA), Amazon (Titan), Perplexity, and DeepSeek are all competing with their own LLMs. In total, over 1 million machine learning models now exist (see slide below) — each requiring costly compute power and pricey data centers.
Source: BOND (Global Technology Investment Firm)
Bubble or Productivity Breakthrough?
With trillions flowing into AI, a natural question arises: Is this a bubble?
Even OpenAI CEO Sam Altman admits we’re in an AI bubble :
“When bubbles happen, smart people get overexcited about a kernel of truth…Someone is going to lose a phenomenal amount of money… and a lot of people are going to make a phenomenal amount of money.”
Both realities can be true:
- Yes, hyperscalers are spending like “drunken sailors.”
- Yes, AI demand and productivity benefits are real and growing exponentially.
Consider the trajectory of global cloud revenues: from nearly $0 a decade ago to $300 billion today—a +37% CAGR (see chart below).
Source: BOND (Global Technology Investment Firm)
And the primary reason for cloud growth can be attributed to AI productivity benefits. A recent SAP survey found that workers using AI save nearly one hour per day on average. That’s transformative for companies: higher productivity without needing proportional hiring.
AI Use Cases Expanding Aggressively
AI’s applications now span nearly every sector (see slide below):
- Technology – software engineering, code generation
- Customer Service & Marketing – customer support and call centers
- Transportation – autonomous vehicles and logistics
- Healthcare – drug discovery and development
- Supply Chains – precision manufacturing and optimization
- Automation – multi-purpose robotics
- Cybersecurity – threat detection and prevention
- Education – personalized lessons and curriculums
- Energy – grid optimization and demand forecasting
Source: BOND (Global Technology Investment Firm)
The New Field of Dreams
Throughout history, every great leap—printing press, steam engine, electricity, internet—has required massive upfront investment before the payoff arrived. AI is following the same path. Today, we are in the midst of building a new AI Field of Dreams. However, now, the data centers are the new baseball fields. And as with Ray Kinsella’s diamond, the masses are indeed coming.
Wade W. Slome, CFA, CFP®
Plan. Invest. Prosper.
This article is an excerpt from a previously released Sidoxia Capital Management complimentary newsletter (August 1, 2025). Subscribe Here to view all monthly articles.
DISCLOSURE: Sidoxia Capital Management (SCM) and some of its clients hold positions in GOOGL, META, AMZN, MSFT, NVDA, and certain exchange traded funds (ETFs), but at the time of publishing had no direct position in SAP or any other security referenced in this article. No information accessed through the Investing Caffeine (IC) website constitutes investment, financial, legal, tax or other advice nor is to be relied on in making an investment or other decision. Please read disclosure language on IC Contact page.
Mission Accomplished?
The Federal Reserve has a “dual mandate” designed to “foster economic conditions that achieve both stable prices and maximum sustainable employment.” The “dual mandate” is obviously a moving target, but it appears for now, based on the Fed’s explicit goals, Fed Chairman, Jerome Powell, has accomplished the central bank’s mission. More specifically, inflation, according to the just-reported BEA’s (Bureau of Economic Analysis) GDP Price Deflator statistics, has plummeted dramatically to the Fed’s goal of 2.0% from the sky-high inflation number of 9.1% a year ago (see chart below). Meanwhile, the economy continues to grow (+2.0% GDP growth in the 2nd quarter), and the long-awaited recession boogeyman has yet to appear.
Source: Bureau of Economic Analysis
Rate Pig Moving Through Economic Python
How has inflation plunged so quickly? For starters, in addition to the Fed’s restrictive policy of reducing the balance sheet, since the beginning of last year, the Fed has also effectively slammed the brakes on the economy by taking their target interest rate from 0% to 5.5%. The pace and scale of the interest rate increases have been reduced this year, however it is possible there might be more rate hikes ahead (currently, pundits are betting for no more rate increases this year, although a boost in November is possible if economic data accelerates). Like a pig working its way through the economic python, the large interest rate increases naturally take a while to work their way through the consumer, commercial, and government credit markets.
To put things in better perspective, a study done earlier this year showed the average 30-year monthly mortgage payment for a $500,000 home was higher by more than $800 (up +44%) versus a year ago! But wait, it’s not just consumers feeling the pinch of higher rates. Businesses and governments in all shapes and sizes have felt the pain as well from higher borrowing costs. Post-COVID supply chain constraints and disruptions have eased too, which have helped choke down the high inflation numbers. In the background, let’s not also forget about the disinflationary benefits of ever-expanding technology adoption coupled with the related productivity advantages (see also AI Revolution).
As a result of these dynamics, we are now starting to see cracks appear in our country’s employment foundation as this month’s JOLTs (Job Openings and Labor Turnover – see black line in chart below) and ADP monthly job additions data, which both came in disappointingly low compared to forecasts. Chairman Powell must be ecstatic inflation has plummeted, while the unemployment rate remains near multi-decade lows, and Gross Domestic Product (GDP) growth continues expanding (i.e., no recession in sight).
Source: Calculated Risk and U.S. Bureau of Labor Statistics
Hot Summer, Hot Stocks
Economic activity clearly can and will change, but the stock market has been like the weather this summer…hot. However, after experiencing up-months in six out of the first seven months of 2023, the S&P 500 index decided to take a small breather this month. For August, the S&P slipped -1.8%, but the month was a tale of two cities. By the middle of the month, the index had fallen by roughly -6% on fears of potentially more aggressive interest rate hikes by the Federal Reserve due to better than anticipated economic data. In other words, inflation fears were on the rise and the 10-Year Treasury Note yield temporarily climbed to a 52-week high. By the end of the month, economic data cooled, interest rates dropped a little, and stock prices rebounded smartly by +4.0% to finish the month on a strong note.
For the year, the S&P’s remain strongly positive, up +17.4%. As I have written in the past, the seven largest companies in the S&P 500 index (a.k.a., The Magnificent 7: Apple Inc.; Microsoft Corp.; Alphabet Inc.; Amazon.com, Inc.; NVIDIA Corp.; Tesla, Inc.; and Meta Platforms, Inc.) have contributed to a significant portion of the year’s gains – the average Magnificent 7 stock has skyrocketed an eye-popping +99.0% with NVIDIA being the largest winner, more than tripling in value during the first eight months of the year.
The Federal Reserve can admit they were late to the game in taming out-of-control inflation, but Fed Chair Powell has been swift in moving to preserve his legacy as an inflation fighter. Now that inflation is coming under control and the economy is beginning to cool, Powell needs to make sure he doesn’t murder the economy into recession with overzealous future interest rate increases. Time will tell if the mission has already been accomplished, but so far, the Fed has been delicately balancing an economic soft landing and stock market investors like it.
Wade W. Slome, CFA, CFP®
Plan. Invest. Prosper.
This article is an excerpt from a previously released Sidoxia Capital Management complimentary newsletter (September 1, 2023). Subscribe Here to view all monthly articles.
DISCLOSURE: Sidoxia Capital Management (SCM) and some of its clients hold positions in AAPL, MSFT, GOOGL, AMZN, NVDA, TSLA, META, and certain exchange traded funds (ETFs), but at the time of publishing had no direct position in any other security referenced in this article. No information accessed through the Investing Caffeine (IC) website constitutes investment, financial, legal, tax or other advice nor is to be relied on in making an investment or other decision. Please read disclosure language on IC Contact page.
Digging for iPad Gold with Simplicity
We live in a hyper global competitive world, yet some companies manage to find gold while others unsuccessfully dig for their dreams. What is a major determinant of great companies? Apple Inc. (AAPL), and other companies, may include “simplicity” as a key ingredient. Take the iPad for example. Already the company has successfully exceeded iPad sales target thanks to the shrewd marketing of the simple touch-screen technology. Some call it a glorified iPhone because the iPad uses a very similar interface on a larger scale. Nonetheless, the device is getting rave reviews from the likes of US Today, The Wall Street Journal, The New York Times, Newsweek, and as Stephen Colbert smartly pointed out in his video (below), the iPad even makes salsa to boot. Many estimates point to more than a half million units sold in the first few weeks, making the 2010 estimates of 3-4 million units sold likely too low.
Competition Not a Game Killer
How much more competitive can the personal computer and cell phone markets be? According to the United Nations, we will reach 5 billion subscribers in 2010. With pricing pressure galore, and new Asian competitors popping up all over the place, how can companies grow, let alone make profits? Ever since the revolutionary iPhone was introduced in 2007, rivals have attempted to copy-cat the device. In the meantime, Apple continues to gain market share while they sit on close to $40 billion in cash, not to mention the flood of new cash rolling in the doors ($10+ billion in free cash flow generated in calendar 2009).
Innovation and the Remote Control
One key driver of profitability is innovation, but an elegant solution driven by an out-of-touch engineer with consumer demands will only lead to share losses and headaches. I mean how many times have you pulled your hair out trying to navigate through a 100-button TV remote control or screamed in frustration from attempting to learn a non-Wii videogame?
But Apple is not the only company to find simplicity in its quest for profit domination. In order to be a massive juggernaut like Apple Inc., a company’s product or service must gain mass appeal. A key determinant for mass appeal is simplicity. Beyond Apple, think of other dominant franchises that also operate in massively competitive markets like Wal-Mart Stores (WMT) in retail; Starbucks Corp. (SBUX) in coffee; Google Inc. (GOOG) in internet advertising; Coca Cola Co. (KO) in soda; Netflix Inc. (NFLX) in video rentals, among a host of other category killers. Many of these corporate giants offer products we cannot function or live without. I still find it utterly amazing that my children will never know what life was really like without an internet search on Google or a Caffe Misto Caramel Frappuccino from Starbucks.
All Good Things Come to an End
It’s not clear how much longer these titans of corporate America can thrive. By innovating new products that improve lives in some way, these Dancing Elephants will continue to prosper. But nothing in the stock market is static, so investors should pay attention to several potential derailing factors:
- Valuations: Valuations are extremely important in determining long-run appreciation potential, and chasing winners solely based on momentum (see related article) can lead to problems.
- Market Share Losses: What will be the next computer, cell phone, or e-reader killer? I don’t know right now, but eventually the day will come where these leaders will lose market share to a new kid on the block.
- Rising Costs: Competition is not the only factor in leading to slowing sales and declining profit margins. Inflation either related to labor or other input costs can crimp profits and decay investor appetites.
- Too Big to Succeed: There has been a lot of talk about “too big to fail,” but I strongly believe companies reach a point where they become “too big to succeed.” Either the law of large numbers catches up with these companies making simple math more challenging (think of the supertanker Wal-Mart growing its $400+ billion revenue base), or regulatory scrutiny kicks in (think of Microsoft Corp. [MSFT] and Intel Corp [INTC]).
Size: Peeling More of the Onion
Success can continue for these giants, however at some point “size” becomes a headwind rather than a tailwind. Just as simply as a train can speed down a railway at over 100+miles per hour, under the right conditions the train can derail as well. As Warren Buffett states, when referring to a company’s growth prospects relative to size, “Gravity always wins.”
However, investors should remind themselves that gains can last longer than expected too. Finding “ginormous” winners in many ways is like finding a needle in a haystack. But even if you find the needle in the haystack relatively late in a company’s growth cycle (see Equity Life Cycle story), in many instances there can be a lot of appreciation potential still available. Take Wal-Mart (WMT) for example. If you bought Wal-Mart shares after it rose 10-fold during its first 10 years, you still could have achieved a 60x return over the next 30 years.
Time will tell if Apple will strike additional gold with its iPad introduction, nonetheless Steve Jobs has found an element present in many long-term successful companies…simplicity.
Wade W. Slome, CFA, CFP®
Plan. Invest. Prosper.
*DISCLOSURE: Sidoxia Capital Management (SCM) and some of its clients own certain exchange traded funds and AAPL, WMT, GOOG, but at the time of publishing SCM had no direct positions in MSFT, SBUX, KO, INTC, NFLX, Nintendo or any security referenced in this article. No information accessed through the Investing Caffeine (IC) website constitutes investment, financial, legal, tax or other advice nor is to be relied on in making an investment or other decision. Please read disclosure language on IC “Contact” page.
Dancing Elephants in a Challenging Economy
To many, the significant rebound in global equity markets, since the March 2009 price lows, has merely been a dead-cat bounce or simply a temporary “sugar high” from the extraordinary fiscal and monetary measures taken by governments all over the world. John Authers, columnist at the Financial Times, captures that cycnical view in his daily column. He believes we are on the cusp of financial dynamics that will “drive a bear market for another two decades.” Ouch – pretty harsh outlook.
Perception Can Differ from Reality
Throughout much of 2009, the better than anticipated corporate results were rationalized as improvements only coming from discretionary cost-cutting. Well, as of last week, 73% of the S&P 500 companies that reported quarterly results exceeded earnings expectations, with 70% surpassing revenue estimates as well. With the 9.7% unemployment improving (at least temporarily), the recovery cannot solely be attributed to cost-cuts.
In the midst of the economic recovery (+5.7% growth in Q4 GDP), other animals beyond deceased felines have joined the party, including dancing elephants. More than seven million jobs have been lost since the late-2007 recession began, yet a broad set of companies have thrived through this horrible environment. The bubble economy has certainly had a disproportionately negative impact on particular areas of the economy (e.g., housing, credit, and automobiles). However, in the midst of the global credit tsunami that engulfed us over the last two years, the largest global economic engine (U.S.A.) was still churning out about $14 trillion in the sales of goods and services. Many companies that were not reliant on the financial and credit markets used their superior competitive positioning to generate significant piles of cash. Instead of piling on additional debt (or diluting owners through share offerings), certain corporations tightened their belts, invested prudently, and stepped on the throats of other irresponsible and reckless competitors, which were forced to recoil back into their caves and bunkers.
Dancing Elephants
Times are tough, right? If that is indeed the case, let’s take a look at a few elephants that are trouncing the competition, even under extremely challenging economic circumstances:
Apple Inc. (AAPL) – Revenue growth +32% ($182 billion market capitalization): In the recent quarter, Apple pounded the competition by selling a boatload of electronic goods, including iPhones, iPods, and Mac computers. Next up, the iPad!
Amazon.com Inc. (AMZN) – Revenue growth +42% – ($53 billion market capitalization): In the fourth quarter ending December, Amazon pulverized peers in a cutthroat holiday by selling lots of Kindles (e-reader), growing +49% internationally, and adding a new Zappos.com shoe and accessory acquisition. Organic revenue growth (ex-Zappos) was still incredibly strong at about +23%.
Corning Inc. (GLW) – Revenue growth +41% – ($28 billion market capitalization): Results were buoyed by demand for its liquid crystal display (LCD) glass as consumers continued purchasing LCD televisions, laptop computers, and other electronic devices. In addition, GLW experienced a resurgence in demand for its emissions control products as the auto industry rebuilt supply. Telecom orders in China were solid also.
Google Inc. (GOOG) – Revenue growth +17% – ($169 billion market capitalization): In addition to the growth in the global search advertising market and YouTube video platform, Google also accelerated the deployment of their mobile platform, including their Android cell phone operating system, and concentrated on the expansion of the display advertising market.
Gilead Sciences Inc. (GILD) – Revenue growth +42% – ($42 billion market capitalization): Growth was catapulted by GILD’s dominant HIV/AIDS product franchise, including Atripla, Truvada, and Viread. Pulmonary arterial hypertension drug Letairis and chronic angina treatment Ranexa also contributed to stellar results.
Intuitive Surgical Inc. (ISRG) – Revenue growth +40% – ($13 billion market capitalization): This cutting-edge surgical equipment manufacturer enjoyed robust expansion from continued robotic procedure adoption and higher da Vinci Surgical System sales.
Intel Corp. (INTC) – Revenue growth +28% – ($113 billion market capitalization): The company’s semiconductor sales growth was fairly broad based across its major segments (Data Center, Intel architecture, Atom Microprocessor/Chipset) as demand recovered and depleted inventories were replenished globally.
Netflix Inc. (NFLX) – Revenue growth +24% – ($3.5 billion market capitalization): Netflix added more than one million new customers in the quarter as they continued to eat Blockbuster’s-BBI (and other competitors’) lunch. In addition, the company’s streaming “Watch Instantly” service continues to gain traction.
Although I do currently own a few of these companies, do NOT interpret this partial list of companies as “buy” recommendations – in fact, some of these stocks may be excellent “short” ideas. Regardless of how sexy growth may be, investors should never ignore valuation (read more about valuation). As stated at the beginning of the article, I mainly want to emphasize that trillions of commerce dollars are being transacted, even in demanding economic times. It just goes to show, one can turn lemons into lemonade. Or said differently, even elephants can be trained to dance.
Wade W. Slome, CFA, CFP®
Plan. Invest. Prosper.
DISCLOSURE: Sidoxia Capital Management (SCM) and some of its clients own certain exchange traded funds and AAPL, AMZN, and GOOG, but at time of publishing had no direct positions in GLW, GILD, ISRG, INTC, BBI, and NFLX. No information accessed through the Investing Caffeine (IC) website constitutes investment, financial, legal, tax or other advice nor is to be relied on in making an investment or other decision. Please read disclosure language on IC “Contact” page.
Top 10 Predictions for 2010
#10. Federal Reserve Chairman Ben Bernanke decides pundits were wrong on the housing bubble, so he sets Fed Funds target rate at negative -3.0%. Small businesses start receiving loans.
#9. As part of healthcare reform, Medicare is extended to teens for collagen lip augmentation.
#8. Goldman Sachs, Morgan Stanley, and Citigroup form tri-merger to guarantee they are too big to fail.
#7. Tiger Woods poses in Playgirl to pay for pricey revised terms in his prenup. (see previous post)
#6. Gold spikes to $3,000 per ounce as government subsidizes dental chains in “cash for crowns” gold melting campaign. Consumers get extra cash, but Jujube candy sales plummet. (see previous post)
#5. Bernie Madoff escapes from prison. A cigarette Ponzi Scheme created by Madoff generates enough money to bribe guards.
#4. Apple introduces iPot – a combination iPhone and toilet.
#3. Kazakhstan pays Brazil, Russia, India and China a 5% GDP royalty to be added to the emerging B-R-I-C-K countries. A win-win for all parties, including spelling teachers around the world.
#2. Timothy Geithner retires from Treasury after making millions for being cast as Eddie Haskell in new remake of Leave It to Beaver movie. (see previous post)
#1. Oprah decides to halt her retirement plans. Instead, she signs me to a multi-million dollar deal to co-host a stock & gossip show with her.
HAPPY 2010!!
Wade W. Slome, CFA, CFP®
Plan. Invest. Prosper.
DISCLOSURE: Sidoxia Capital Management (SCM) and some of its clients own certain exchange traded funds (including BKF) and AAPL, but did not have any direct positions in any stock mentioned in this article at time of publication (including GS, MS, C, and GLD). No information accessed through the Investing Caffeine (IC) website constitutes investment, financial, legal, tax or other advice nor is to be relied on in making an investment or other decision. Please read disclosure language on IC “Contact” page.
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