Friday File: Earnings Season, AI Panic and a Couple Cowardly Buys

Earnings Reports - Alphabet (GOOGL, GOOG) reported strong growth with unexpected acceleration in key business areas, while Amazon (AMZN) showed slightly less impressive results, described as "pretty good" [2] - Investor reactions to both companies' earnings were heavily influenced by their projections for 2026 capital expenditures [2] Market Sentiment - The market exhibits mixed feelings towards AI, with enthusiasm for its potential, fear of its impact on traditional software companies, and concerns about overspending by major firms [3] - There is a growing worry that large companies may be overextending themselves financially in their AI investments [3] Capital Expenditures - Alphabet generated approximately $165 billion in cash flow from operations last year and anticipates capital spending of about $180 billion in 2026, primarily for AI data centers and upgrades [4] - Amazon reported around $140 billion in cash from operations last year and is guiding for $200 billion in capital spending this year, focusing on AWS expansion, satellite launches, and e-commerce fulfillment [4] Demand and Growth - Both Alphabet and Amazon are generating sufficient cash flow and maintaining good margins to support their growth-oriented capital expenditures, citing a clear view of rising demand [5] - Alphabet specifically noted a significant increase in demand for Google Cloud services, with a 48% growth attributed to the launch of Google's Gemini AI systems, which positively impacted cash flow and margins [5]