Looking for profit margin benefit from AI adoption in earnings, says Charles Schwab's Sonders

AI Spending & Monetization - The open question is when AI adopters will demonstrate earnings, productivity, or profit margin benefits [2] - Companies bringing AI into the mix are not yet seeing terribly concrete results [2] Capex & Free Cash Flow - The Magnificent 7 represents almost a third of all S&P 500 capex [3] - Free cash flow growth for the Magnificent 7 has gone from over 60% positive year-over-year to slightly negative territory [3] - An increase in companies are announcing deals by utilizing debt as opposed to funding it out of cash flow [4] Profitability & Growth - Focus is on the differential between topline growth and bottomline growth and the ability to maintain or grow profit margins [5] - Four sectors out of 11 have an accelerating pace of profit margins, while six have a decelerating pace [6] - Aggregate profit margins are just under 13%, better than expected [6] - Tech, financials, utilities, and basic materials show stronger profit margins [6][7] - Communication services has a slight deceleration in the rate of profit margin growth [7] Macro Commentary - Broader commentary from companies is helping to color the macro landscape in the absence of government-issued data [7] - Commentary suggests resilience on the demand side of the economy [8]