Source: Sina US stocks
According to an analysis by Morgan Stanley strategists, US companies discussed cost control with unprecedented enthusiasm during the earnings call to push for capital reallocation and investment in new technology.
The team led by Michael Wilson wrote in the report that during this earnings season, the written records of US companies referring to “operational efficiency” reached the highest level in history. At the same time, companies focused on limiting expenses, but also invested in “technologies that can improve future productivity, such as artificial intelligence.”
The strategists said there is a clear overlap between the industry where operational efficiency is most commonly discussed and the industry that discusses artificial intelligence. These industries include software, professional services, healthcare services, and financial services.
According to the data, S&P 500 index constituent companies such as Pfizer, BlackRock, and Fanlin Group discussed operational efficiency during this quarter's earnings conference call.
Managing expenses was a key theme this quarter. The Walt Disney Company said profits will increase by at least 20% this year thanks to cost cuts. Hertz Global Holdings Inc. wants to reduce costs, while Levi Strauss & Co. said the new measures to improve efficiency will include cost reduction measures such as layoffs.
Some companies are reallocating capital to grow their business. Estée Lauder is making layoffs as part of a restructuring plan to be able to respond more quickly to new beauty trends and increase investment in the brand. Meta Platforms Inc. is investing heavily in AI advancements, and Amazon will be wary of new investments.
When it comes to artificial intelligence, all eyes will be on Nvidia. The company is expected to release earnings reports later this month. Arm Holdings Plc has soared so far this quarter, and spending on artificial intelligence has helped boost the chip design company's performance forecasts. Palantir Technologies Inc. is also benefiting from huge demand for its artificial intelligence technology.
Expectations for Nvidia are high. The company has been the biggest beneficiary of the AI trend. Analysts estimate that the company's earnings per share will increase 602% year over year in the fiscal quarter ending January 31.
Morgan Stanley's Wilson recently added Nvidia, Apple, Microsoft, and Alphabet Inc. to the list of high-quality growth stocks rated by the bank's analysts. He is optimistic about these high-quality stocks, and also extends to stocks with high operating efficiency.