According to the latest analysis report from the renowned investment firm D.A. Davidson, in the latest round of financial reports from the tech giants in the US stock market, Facebook and Instagram's parent company Meta Platforms seem to have achieved the best ROI in terms of artificial intelligence investments among the "big six tech giants" that have released financial reports. The D.A. Davidson report also indicates that among the super-scale cloud computing tech giants, Amazon appears to emerge as a new leader in artificial intelligence—ganering massive investments in AI that are beginning to drive accelerated expansion in Amazon AWS cloud computing service revenue.

Currently, among the seven tech giants in the US stock market (namely, the Seven Hk&S Hotels), apart from the AI chip leader Nvidia, the other "Six Giants" have already disclosed their financial reports. Overall, as expenditures in artificial intelligence continue to grow substantially but the profit prospects in AI remain uncertain, the financial reports of the "Six Giants" failed to satisfy investors, which was also the core reason for the decline in the S&P 500 Index and Nasdaq Composite Index last week, where they hold high weights in these two major indexes. These tech giants are increasing their expenditures, building artificial intelligence datacenters to meet the almost limitless demand for AI inference/training capabilities, while Wall Street is eager to see faster returns from the multi-billion dollar investments.

The magnificent seven tech giants in the US stock market that hold a significant weight in both the S&P 500 Index and the Nasdaq Composite Index, collectively known as the "Magnificent Seven," include: $NVIDIA (NVDA.US)$Please use your Futubull account to access the feature.$Apple (AAPL.US)$Please use your Futubull account to access the feature.$Microsoft (MSFT.US)$Please use your Futubull account to access the feature.$Alphabet-A (GOOGL.US)$Please use your Futubull account to access the feature.$Amazon (AMZN.US)$Please use your Futubull account to access the feature.$Meta Platforms (META.US)$ and $Tesla (TSLA.US)$.

Global investors have been flocking to the seven major tech giants led by Nvidia since 2023, mainly because they view these cash-rich giants as 'safe havens' in the face of uncertain interest rate cuts and economic slowdown, and also due to their massive investments in developing AI across global enterprises and government sectors. Given the massive market size and incredibly strong financial prowess of Nvidia, Meta, Amazon, and Google among others, they are in the best position to expand revenue through the use of artificial intelligence.

From the overall financial data of the third quarter, their significant investment in AI has still yielded very low overall returns, especially for Microsoft. Relying on its large shareholder status in OpenAI, it has fully integrated OpenAI's proud GPT model with Microsoft's product line. However, its massive expenditure in artificial intelligence has not yet translated into the substantial returns that investors expect. According to Visible ALPHA's data, Microsoft's capital expenditure in one quarter currently exceeds its annual expenditure before the 2020 fiscal year.

"What investors may not realize is that Microsoft consistently over-invests every year—just like this year—they may weigh on profit margins over the next six years." said Gill Luria from D.A. Davidson.

D.A. Davidson: Meta and Amazon achieve the best returns on artificial intelligence investments.

Analysts Jill Lulia and Alex Part from D.A. Davidson stated in their analysis report released on Monday: "Unlike large-scale enterprises that rent pickaxes and shovels to massive customer groups who have not yet discovered a large amount of 'artificial intelligence gold,' Meta is finding its own gold in the form of a 23% compound revenue growth rate and 19% advertising business revenue." "It is obvious that artificial intelligence can and will produce more and better advertising content, creating more value for Meta's customers, so Meta's artificial intelligence advertising tools will be sold at a higher price."

The investment institution also praised Meta's artificial intelligence large-scale model Llama open-source model, which is driving global developers to adopt higher-level artificial intelligence technology on a large scale, stating that this open-source model is invisibly starting to build an ecosystem exclusive to Meta, and the institution also emphasized that among the giant cloud computing giants, Amazon seems to surpass the other two cloud computing technology giants, Microsoft (MSFT.US) and Google (GOOGL.US), in terms of artificial intelligence investment returns.

"Amazon is in a favorable position to expand its leading position in cloud computing, as it releases retail capital expenditures for AWS artificial intelligence investments, and can leverage its self-developed AI chips to create a cost advantage lower than Microsoft Azure cloud services," said the team led by Lulia. "The third quarter is also a turning point of investor focus on retail profit margins, as various negative concerns in the past quarters have now largely dissipated."

Meta Platforms announced last week that its Q3 revenue was $40.6 billion, a 19% increase year-on-year, slightly higher than the market's expected $40.3 billion; earnings per share were $6.03, higher than the market's expected $5.25. Regarding the market's performance outlook, Meta predicts Q4 revenue to be between $45 billion and $48 billion, with analysts generally expecting $46 billion.

In the field of digital advertising placement relied on by Meta, powerful open-source AI large models launched by Meta with 3 billion users, along with various generative AI-assisted software tools, drive advertisers to cover a wider range of potential user groups, bringing a new AI-based advertising recommendation experience to Meta advertisers and users. This is also an important logic for Wall Street's expectation of Meta's stock price to continue to rise. Digital advertising placement is the core revenue engine of Meta, and Meta's AI advertising assistant tools have helped Meta's advertising business revenue exceed expectations for several quarters.

Why are more and more merchants beginning to use Meta's advertising tools on a large scale? The main logic lies in the fact that, with the blessing of Meta AI chatbots, advertisers hope to use Meta AI to accurately cover a wider range of potential user groups (after all, the user base of Meta's software ecosystem exceeds 3 billion). Therefore, research data shows that most advertisers plan to increase or maintain advertising business spending on Meta's digital advertising platform, which may help Meta achieve stronger-than-expected performance in the fourth quarter and continue to take a positive growth trajectory next year.

For the three tech giants Microsoft, Google, and Amazon, the market believes that they are benefiting as secondary to the AI chip leader Nvidia in the frenzy of artificial intelligence. Since the AI wave swept the globe in 2023, these three market-leading global cloud computing giants, far ahead of other cloud computing participants, have made large purchases of Nvidia's high-performance AI GPUs, intensively deploying B-end and C-end software application developers in the AI field, aiming to comprehensively reduce the IT technical thresholds for various industries to develop AI application software. Therefore, in the eyes of investors, it is undoubtedly that the three major tech giants, with a huge share in the cloud computing field, are able to enjoy the huge software spending scale brought about by the global layout of generative AI and the spending scale of cloud-based AI training/inference capabilities.

Amazon Bedrock upgraded version of Amazon AWS cloud computing service, is a comprehensive generative AI basic service, allowing AWS enterprise customers to easily access pre-trained FM basic models from leading AI companies for various core generative AI applications from search to content creation to drug discovery. Amazon Bedrock aims to help users easily access and leverage high-performance basic models from AI giants such as AI21 Labs, Anthropic, Cohere, Meta, Stability AI, and Amazon.

By providing unified API access to these models and leveraging NVIDIA AI GPUs and AWS self-developed AI accelerators on the Amazon cloud platform, Amazon Bedrock not only reduces the technical barriers for enterprises or individuals to develop and deploy generative AI applications, but also allows AI developers to flexibly use different FMs and easily upgrade to the latest large model versions. Amazon Bedrock supports a wide range of generative AI application development, from text generation, image generation to video creation, serving extensively in content creation, automated marketing, customer service, and other fields, further promoting the commercial application prospects of Amazon's generative AI technology.

Amazon's financial report released last week shows that in the third quarter, Amazon's cloud service business unit AWS revenue increased by 19% year-on-year to $27.5 billion, meeting market expectations. With strong support from generative AI, Amazon AWS revenue growth has accelerated for five consecutive quarters. Amazon's overall revenue in Q3 increased by 11% year-on-year to $158.9 billion, exceeding market expectations. Looking ahead, Amazon expects fourth-quarter revenue to reach as high as $188.5 billion, better than the analyst's average forecast of $186.4 billion; Amazon also expects fourth-quarter operating profit to be around $18 billion, higher than the analyst's average forecast of $17.5 billion.

Amazon stated last Thursday that it expects to increase capital expenditures in the foreseeable future to help support the development ecosystem of AI software. The company's CEO, Andy Jassy, stated in a conference call with analysts that artificial intelligence may be a once-in-a-lifetime opportunity.

Following the announcement of the latest financial reports and performance outlook of the 'Big Six', compared to other giants, D.A. Davidson is more bullish on the stock price prospects of Meta and Amazon in the next 12 months, especially Meta's potential for a rise. After Meta's third-quarter earnings report, the firm significantly raised Meta's target stock price from $600 to $700, reiterating a 'buy' rating, while Meta's stock closed at $560.680 on Monday. After Amazon's earnings report, D.A. Davidson reiterated the firm's $235 target stock price for Amazon and 'buy' rating, with Amazon's stock closing at $195.780 on Monday.

NVIDIA remains one of the biggest beneficiaries of the AI boom.

D.A. Davidson stated that another cloud giant, Google (GOOGL.US), has achieved impressive growth in its ultra-large-scale cloud computing business, while its advertising business remains resilient. Google's financial data announced last week shows that massive investments in infrastructure like AI GPUs related to artificial intelligence are starting to pay off. The company stated that costly attempts at artificial intelligence are beginning to bear fruit, driving its cloud computing business profit performance above analyst expectations, and with the active push of the Gemini AI large model, the scale of its flagship Google search engine usage has significantly increased.

Among the ultra-large cloud computing giants, while capital expenditures are very high, only Microsoft Azure is expected to potentially decelerate revenue growth in cloud services.

"Microsoft has invested over $50 billion in incremental capital in its generative AI-related business - of which, in the past six quarters, over $35 billion in incremental capital, close to $14 billion in investments and commitments to OpenAI, and potentially billions of incremental operating expenses are reallocated from other businesses," analyst Luria of D.A. Davidson added. "It is important to note that Microsoft is still increasing the rate of excess capital expenditures, with the denominator of the annual return on investment doubling every year."

Although consumer electronics giant Apple Inc. (AAPL.US) has not yet shown real 'large-scale returns' from the artificial intelligence investment wave, D.A. Davidson emphasizes that this will materialize over the next few quarters through Apple Intelligence. The institution is bullish on the new wave of global Apple smart phone upgrades led by Apple Intelligence in the coming quarters.

In their report, D.A. Davidson finally mentioned the crucial role of Nvidia, as tech giants make "continuing to burn money" comments around increasing artificial intelligence capital expenditures. D.A. Davidson states that Nvidia will continue to thrive and remain one of the biggest beneficiaries of the global AI boom for the foreseeable future. 'As long as Microsoft continues to invest heavily in upgrading its massive data centers, we believe it will continue to shift shareholder value from Microsoft to Nvidia,' said Luria of D.A. Davidson.

Global companies, including the 'big six,' are still unstoppable in the 'burning money wave' for artificial intelligence. The stock logic closely related to AI chips is extremely hardcore, and the stock prices of AI chip leaders like Nvidia may continue to surge. Particularly, Nvidia, the AI chip dominator with a market share of 80%-90% in the data center AI chip field, may continuously set new historical highs, breaking through the widely anticipated $150 price point by Wall Street analysts is perhaps just a matter of time.

AMD CEO Lisa Su recently stated at a new product launch event that the demand for datacenter ai chips, including AI GPU, far exceeds expectations. It is expected that by 2027, the datacenter AI chip market size will reach $400 billion, further rising to $500 billion in 2028. This implies that the compound annual growth rate of the global datacenter AI chip market size is expected to exceed 60% from 2023 to 2028.

Editor/rice