09/02/26: Big Tech earnings, AI momentum & macro updates

Monday Espresso Podcast - 9th February 2026

[00:00:00] Rory Dowie: Good morning. Today's Monday, the 9th of February. My name's Rory Dowie, Portfolio Manager here at Marlborough. Today I'm delighted to be joined by Andrew Shaw. Andrew is one of our Investment Analysts on the team. So Andrew, firstly, good morning.

[00:00:12] Andrew Shaw: Morning, Rory.

[00:00:13] Rory Dowie: Lots going on last week. Notably some big earnings releases in the US, which I want to get into.

[00:00:18] Rory Dowie: We also had a deluge of macroeconomic data and some central bank decisions. But before we get into that, Andrew, markets, was it a good start to February?

[00:00:25] Andrew Shaw: It was tougher wheat last week for markets, Rory. The largest market, the US was finishing down around 2%. That was off the back of some tech heavyweights reporting earnings.

[00:00:36] Andrew Shaw: The NASDAQ, which is the tech heavy companies in the US, also actually finished down around 4%.

[00:00:42] Andrew Shaw: Aside from the US things were a bit better. The UK and Japan were both up around 1% while Europe was up around about half percent.

[00:00:49] Andrew Shaw: Year to date, the place to be is still emerging markets, that's leading the way with returns of 7% so far this year, most other regions are up around 4%, and the US is essentially flat for the year.

[00:01:03] Rory Dowie: Okay. So the US struggling a bit, and particularly the tech side of the markets, that leads us nicely into some of the earnings that were reported last week. Notably, we had Amazon and Google. Do they give us any colour on why the US was down at all last week, Andrew?

[00:01:16] Andrew Shaw: Yeah. Well, the single biggest theme was the staggering increase in CapEx or capital expenditure, the money spent on physical infrastructure like data centers and AI chips.

[00:01:28] Andrew Shaw: Amazon shocked the market by guiding for $200 billion in CapEx for 2026, which is significantly higher than the $125 billion they spent in 2025.

[00:01:40] Andrew Shaw: Alphabet or Google projected CapEx between $175 billion and $185 billion for 2026, and that's doubling its spend from 2025.

[00:01:52] Andrew Shaw: What do we take away from all this? Well, the magnificent seven are in an all out arms race. They are prioritising long term AI dominance over short term cash flow.

[00:02:02] Andrew Shaw: What does this mean for investors?

[00:02:04] Andrew Shaw: Well, it means profit margins may feel squeezed in the near term as these massive investments are digested. We think that's predominantly why the US market was down last week.

[00:02:14] Rory Dowie: Okay. And I guess that capital expenditure on top of the capital expenditures that we mentioned on the pod last week from Metro, Microsoft, actually, if you look at 2026, expectations on capital expenditures expected to be around $600 billion.

[00:02:28] Rory Dowie: I guess one may argue that this investment is justified if these companies are growing revenues fast. i.e. there is some sort of return on this investment.

[00:02:35] Rory Dowie: I guess the question then is, Andrew, is there any evidence of that from those earnings prints last week?

[00:02:41] Andrew Shaw: There is, yes and you can see evidence of that in the cloud services divisions of these companies.

[00:02:47] Andrew Shaw: Google Cloud, for example, surged 48% year over year and that's reached a $70 billion annual run rate, and that was a major beat compared to analyst expectations. AWS or Amazon re-accelerated to 24% growth, and that's its fastest pace over three years.

[00:03:05] Andrew Shaw: And AI is no longer a buzzword. It's driving real enterprise spending. Companies are moving the data to the cloud specifically to run AI models. Which is a massive tailwind for these hyper scales.

[00:03:18] Rory Dowie: In summary, I guess then lots of spend, market is worried a little bit, this may hurt the company's profit margins. Though we are seeing some evidence that the demand is there as you mentioned in those cloud divisions.

[00:03:29] Rory Dowie: I guess whilst we're on tech shifting tact a little, software is an area which has struggled over the last six months or so, and last week we saw very weak performance from that group.

[00:03:38] Rory Dowie: Do you want to just tell our listeners what's been going on there?

[00:03:41] Andrew Shaw: We're gonna call it the Anthropic Effect. The primary catalyst last week was the release of a new tool by AI startup Anthropic.

[00:03:50] Andrew Shaw: They're the makers of the Claude LLMs, they launched a suite of automated plugins. One specifically was a legal coworker designed to handle complex tasks like contract review, compliance tracking, and document analysis. This directly threatens the moats of established giants like Thomas Reuters and Relex, investors panicked that if a single AI plugin can do what an entire software suite does, the traditional software business model is in trouble.

[00:04:20] Rory Dowie: So I suppose if you like, the market is worried that AI is going to come and replace some of these software companies, so there's an existential threat to these companies. The market is not wanting to be exposed to that risk, so investors seem to have been selling out of those
companies.

[00:04:34] Rory Dowie: We don't think it's as black and white as that, we think there'll be some winners and losers. So potentially some opportunities there in the future.

[00:04:41] Rory Dowie: I guess finishing off Andrew, we had some jobs data in the US and also central banks in Europe and in the UK, we had a meeting here as well. What were the updates?

[00:04:51] Andrew Shaw: Data wasn't particularly good in the US. January had the biggest number of layoffs since January of 2008, only 22,000 jobs were added, and that's significantly lower than the economist expectations of 45,000 jobs. On the Central Bank front, the ECB held rates, and so did the Bank of England.

[00:05:11] Rory Dowie: So I guess not too much to report on the central bank side of things, the ECB and the Bank of England leaving things unchanged. And then those jobs numbers, let's see what that might mean for any further rate cuts in the US I suppose.

[00:05:22] Rory Dowie: I guess looking ahead, is there anything of note for our listeners to keep an eye out for this week, Andrew?

[00:05:26] Andrew Shaw: We've got inflation data and retail sales data in the US and in the UK we have GDP data.

[00:05:34] Rory Dowie: Brilliant. Thank you very much, Andrew. Listeners, hope you found that useful. As always, we're here if you have any questions. Until next time. Wishing you all a great week ahead.