Chapter 1: What is the significance of Big Tech's $650 billion investment in AI?
Big tech is spending big money, but is it gonna pay off? Motley Fool Money starts now.
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From Fool Global Headquarters, this is Motley Fool Money. Welcome to Motley Fool Money. I'm Travis Hoyum, joined today by Lou Whiteman and John Quast. And guys, big tech took center stage this week, and the conversation was all about capital expenditures between Meta, Microsoft, Alphabet, and Amazon. We got guidance for about $650 billion in in CapEx for 2026.
A year ago, these companies weren't spending enough. Now the market is saying, whoa, whoa, whoa, we're going to spend this much? We're going to spend all of your operating cash flow? Lou, what do we take from this week? Because it seems like the numbers were so big that even the most bullish AI investors were shocked at how much money these companies are spending.
Let's double down on just how big that is. Let's get some perspective here. That's 650. Bloomberg says the largest U.S. automakers, construction manufacturers, railroads, aerospace companies, transports, and energy companies, 21 companies in all, they are going to spend a combined $200 billion, so less than a third of that in 2026. for 21 companies.
It's also, ironically, 650 is about the combined loss of market cap by these big four post-earnings when they've announced this. Look, so here's the thing. How do we think about AI? I am not going to dispute the potential. I am not sure about the timeframe and I am scared about the economics. All three things are true.
Yes, there is a potential for payoff, but what will that payoff be and how long will it take? I think that's what the market is worried about. Also, You also have an opportunity cost here. $650 billion is a lot of money. Whether or not it's just all dividends buyback or inventing the next Waymo, something is not happening because of all of this capex spending, so it darn well better pay off.
I think that's just really the question the market is asking is, will it actually pay off?
I want to come back to the payoff for the hyperscalers. But John, the first thing that I want to talk is, this rising tide seems to be lifting a number of similar boats, if you will, in the supply chain. And that is, look, if these companies are spending a ton of money, there's only a handful of companies they're going to be spending it with. Their revenue is obviously going to go up.
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Chapter 2: What are the implications of the SaaS-pocalypse for software companies?
Some of them have even given us some pretty good details on exactly where the money is going. Alphabet, for example, spending about 60% of its capex on servers. If you look at 2026, it's going to spend over $100 billion on servers. Let's think that through. One of the leaders in this space is Dell. I know we don't talk about Dell very much, but it's a leader in servers.
You look at this stock right now, trading at only 10 times its forward earnings. I wouldn't be surprised if Dell had a bumper year this year in 2026 with all the spending that these hyperscalers will put out on servers.
Lou, the other thing that seems to be coming into focus, at least in the market's mind, is that the disruption that we thought we were seeing coming six months to a year ago is particularly from OpenAI. We had that huge RPO number that came out from Oracle. I think $1.5 trillion in infrastructure to help OpenAI build out their ecosystem.
Now that's getting flooded by these other companies that have the cash to keep investing. Are these big hyperscalers, the big tech companies that I mentioned, are they just trying to bludgeon these startups that could have potentially been the disruption to their business model? Think Google in particular, but even companies like Amazon.
I mean, if people go to ChatGPT to shop, that's bad for Amazon. If they're shopping at ChatGPT, companies aren't spending as much money on meta ads. So they all have an incentive to not disrupt the status quo. So is this money just basically saying, hey, look, you're not going to disrupt us or replace us by having better AI than we do?
I don't know if it's a, they're out to get at OpenAI or they're trying to bludgeon them. I mean, I think Sam Altman's made enough comments out there that maybe that's part of it, you know, like there would be a little bit.
But I think, look, if this is the cost of doing business, if this is what it takes to win this game, it's really hard for a company that doesn't have that revenue base to win that game. So, definitely, whether or not it's a this is just what they have to spend, or if they're trying to bully upstarts out of the market, I don't think that matters.
I think either way, it's bad news for these companies that don't have the revenue base. Look, you can pivot here. I still wonder about commoditization with the models, and I still wonder if the real value won't be what you can do with someone's model, whether or not it's your own or not. I don't know, OpenAI might be too far down the road to really pivot there, maybe not.
And I think that that's where the opportunity is below the hyperscalers. It's, okay, if this AI is being developed and if it's half as good as we hope it is, what tools can you make with it and what value can you layer on? That, I think, is the real opportunity in 2026, even more so than these just throwing tons of money at it and hoping there's a payoff down the line.
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Chapter 3: How are big tech companies strategizing to maintain market dominance?
So the margin could potentially get competed away over time.
Exactly. It's the famous line from Jeff Bezos, your margin is my opportunity. If we circle back to Nvidia, the operating margin right now is around 60%. It was 20% several years ago, which is also quite good for an operating margin, three times that now.
And so, if you think about this, all of the other technology companies, they would love to take away some of this revenue opportunity from Nvidia with their own products. You look at Alphabet creating the TPUs, you see all of these companies, and as well with the clouds as well. Nvidia has incentive to not have all of its eggs in just the hyperscalers clouds.
It wants the Neo clouds to succeed as well. And so you do see it investing in the Neo cloud so that the Neo clouds can buy its GPUs. So there's a lot of competition here. It's kind of a stalemate. You don't want to expressly be out competing with your biggest customers, but at the same time, there are margin opportunities here.
All right, let's get to the big question that I think we're all asking. And that's the bubble question, the overspending question. Lou, I've always heard about bubbles being talked about as, you know what, it's not really a bubble until we start adding debt to the equation. It's not really a bubble until no one thinks it's a bubble. It seems like we're there now.
Not only are the hyperscalers now adding debt, you have companies like the Neoclouds that have a ton of debt. You have Oracle, which now has over $100 billion worth of debt. They were supposed to be one of the winners of the OpenAI build-out. There's that debt. There's that leverage there. There's also... you know, plenty of people who don't think this is a bubble.
I think there's a lot of people right now with this amount of spending. Hey, if these companies are going to keep growing their spending, how can this possibly be a bubble? Is that a concern?
Concern? Sure. I'll note that I don't remember from my econ 101 class ever getting a real definition of a bubble. Bubbles tend to be clear in hindsight, right? That's true. Whether or not this is a bubble really comes down to what they do with all of this stuff they're buying and building. And that is really, really hard to know.
I think the market reaction this week was sort of acknowledging that risk of the uncertainty. None of us know how this all plays out. Could it be a bubble? Yeah. But here, one thing I do want to say, because I've heard a lot about the big macro and what's going to happen here. This may be a hot take, people. This isn't what I'm hearing when I turn on the TV right now.
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Chapter 4: What are the potential risks of AI overspending?
That can keep an economy that's weak elsewhere going. There could be a price to pay eventually. I don't want to be too Pollyanna, but in the near term, if they are going to spend what they're going to spend, that has to be good for the chances of an up year of the economy continuing on, at least in the near term.
If these companies are overspending right now, I'm not sure what they can do about it at this point. It's kind of the sunk cost fallacy, if you will. They've spent so much already, and everyone else is still spending, so we got to keep spending too, right?
It's like a who blinks first kind of a scenario.
Exactly. Especially considering that they have money coming out of their ears. We talked about the profit margins. They do have money and they do have ability to raise more. If your competitors are still spending, you got to keep spending yourself.
Well, it's going to be fascinating to see how this plays out because the numbers, even to those of us who follow this on a day-to-day basis, I think are shocking at this point. When we come back, we're going to talk about some of the downstream impacts of AI and that's causing a SaaS-pocalypse. You're listening to Motley Fool Money.
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Welcome back to Motley Fool Money. If you have followed the market at all over the past week or two, you can see that SaaS stocks have been absolutely hammered in 2026, and the selling seems to be getting worse by the day. The theory seems to be that AI is going to do everything that software companies do today.
But my big question is, John, if the software companies aren't going to be valuable and aren't going to be making money, who pays for all the AI? It seems like there's a lot of different narratives going on here. So what's the real story?
That's a good question. What is the real story? Look, we are talking about the software stocks selling off. I don't know if that shoe quite fits. Because you look, yes, there are some software stocks that are down and down by a lot. But there are some other ones that are down as well, such as quantum computing stocks. look at IonQ and Rigetti, both of those down more than 30% here to start 2026.
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Chapter 5: How are semiconductor companies positioned in the AI landscape?
To John's point, it does feel like that this week, we've had an excuse to acknowledge some of what we should have been worried about the whole time. That's the weird thing about market psychology. there's very rarely a real shock, like Liberation Day or something. Normally, it's just we suddenly care more about information we already had than we did yesterday.
And it feels like it doesn't matter until it does. It does feel like there's an element of that just to the stock market this week. That said, I think I get the reason for the SaaS sell-off. And I do think that, look, John, yes, everything's down, but some of these were down a lot more than the broader market.
It feels like AI implementation, you know, I don't know if it's going to be the imaginary friend on everyone's shoulder. I do think it's going to be a lot of processes that right now we use software for, just kind of taken more customizable or a better option. I keep using the analogy of almost like what Microsoft Word did to the typewriter.
It's just better tools for the job, incremental progress. A lot of these one-trick enterprise software, I think they are vulnerable.
So you're saying the companies that are built on a feature and not necessarily a platform, they're the ones that are going to be potentially in trouble?
Yeah. I know just from seeing companies implement it that a lot of times, you get on Amazon Cloud and they have 15 partnerships that give you versions of stuff that you're currently paying for as part of your package.
And the stat that I heard this week, I don't know if you guys heard this, but the average large company has over 400 different SaaS applications that they're paying for on an ongoing basis. And every one of them, I'm sure, answers some sort of question. The question is, if there's, you know, let's say 200 of them or 300 of them are a feature, you know, it's a payroll feature.
And now that can just be rolled into this bigger thing that AI can answer. Maybe those don't need to be paid anymore.
Yeah.
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Chapter 6: What factors are influencing the performance of restaurant stocks?
There are some software stocks that I wouldn't touch right now, not because I'm certain they're doomed, but just because I'm unsure of what the future holds for them. But you look at a stock, I highlighted it yesterday on the podcast, GoDaddy, ticker symbol G-D-D-Y.
It's growing, its profit margins are expanding, yet shares are down 50% in the last year, and it now trades at nine times forward earnings. That's intriguing to me. or take a shift for payments. I know that payment stocks aren't really popular right now, but it's still growing the top line more than 20% and trades at eight times forward earnings.
I can't remember a time that I could look at the market so close to all-time highs and then find these high-growth, cheap, profitable companies throughout the market.
Yeah, it is fascinating to sort of look and go, wait, this company that I wanted to buy but thought it was really expensive is now really cheap. What am I missing? And oftentimes that's when the values or when the great buys can come out is when you feel crazy buying something that everyone else is selling. But it's hard to know what's real and what's not in this market.
When we come back, we're going to play in a little Olympics game, give gold, silver and bronze out. You're listening to Motley Fool Money.
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Welcome back to Motley Fool Money. In honor of the Olympics starting today, we're gonna give out some gold, silver, and bronze to some categories that I think it'd be fun to talk about. Big tech CEOs, restaurant stocks, and potential IPOs for 2026. So, John, I'm going to have you go first here. I gave you a list of big tech CEOs.
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Chapter 7: Which companies are potential IPO candidates in 2026?
Travis, I said it the other day on a different show with you, there isn't a management team in big tech that I would trade with Microsoft, and there are some really, really good names on this list. But Nadella, just the way he captains this massive ship with so many tentacles and so many different things, and the way it just keeps going, that to me is what I want in a CEO.
All right, Lou, let's round yours out first. Who is the silver and who is the bronze?
Jensen Huang has to be the silver, and how he's not the gold just speaks to how good of a group this is. I mean, it's one thing to hit the lottery once, but Nvidia has a history of always being there when a trend happens. That is true.
You talk about Ethereum. Ethereum was something that was a huge boom for Nvidia. We don't remember that. That was a boom and bust, and then right behind it, AI.
Gaming, AI, autonomous. Look, maybe if you do that once, you're lucky. If you do it more than once, you either have a crystal ball or you're really good at allocating capital to future-proof your business. I don't know how you can go wrong with what Nvidia has done. That said, I can only give them silver.
For bronze, I'm going to go with Pichai because I do really respect everything John said about what's going on in Alphabet. A lot of what I said about Microsoft, you can also apply to Alphabet. I really love the job they're doing. There are some great management teams in big tech. Maybe it's because that's where the money is, so that's where the smart people go.
But you can do a lot worse than this list.
John, who's silver and bronze for you?
Yeah, me and Lou agree with the silver medal, and that's Jensen Huang for me as well, and for all the reasons that Lou said. He does have a very good ability to see where things are going in the world. I'd say he does a really good job of communicating that to his shareholders and his team as well. Definitely, he has to make the podium as the world's most valuable company.
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Chapter 8: What stocks are currently on the radar for investment?
That is Zuck in this group. Not to take away from him. And look, poor Andy Jassy. I think Andy Jassy's doing it.
Yeah, that's what I wanted to ask you about. He gets absolutely no love here. And no love from the market, to be fair. Shares are down 10% as we started recording today.
Well, you know, he's kind of the Steve Ballmer, isn't he? I mean, I don't think Steve Ballmer was as bad as kind of now his legacy is, but it's tough to follow the Bezos, the Gates. And part of it is that those CEOs probably got out at the right time. So it's kind of do no harm. Maybe it's to the next guy that gets to make bold decisions again.
Zuckerberg, I'll tell you, I don't know if he deserves to be the platinum medal or just not even invited to the Games. Zuckerberg, if nothing else, got one thing right, and it happened to be just the fountain of youth of cash, just like this cash flow machine. As John said, he isn't exactly a standout in what he's done with it since, but he owns that fountain and he uses it to his advantage.
I guess that gets him an invite to this Olympics, if nothing else.
Let's move on to restaurant stocks. This is an area that has gotten absolutely clobbered by the market, which I tend to think means there's maybe some buying opportunities, but it's also possible that things like GLP-1s are going to change the way that we eat forever. I've given you five stocks. John, I'll start with you. Cava, Chipotle, Starbucks, Portillo's, and Texas Roadhouse.
Who do you got bronze, silver, and gold?
Well, maybe I should start with who I left off the podium completely because I left them off for the same reason. I left off Chipotle and Starbucks. I think that both of these companies are facing some pricing issues that its customers are pushing back. And when you kind of get into that dilemma, then your margins start taking a hit. And we're already seeing that play out with Chipotle.
Do we have overexpansion problems with both of them too?
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