JEROME POWELL LIVE FOMC, BIG TECH ALL REPORTS AT ONCE | GOOGLE, MICROSOFT, META, AMAZON

SUMMARY

Jerome Powell presided over his final Federal Reserve meeting as chair, maintaining interest rates amid global uncertainty and signaling a continued focus on inflation and employment. Following the decision, major technology companies including Google, Microsoft, Meta, and Amazon reported earnings marked by unprecedented capital expenditures and rapid growth in AI infrastructure and cloud services.

MAIN POINTS

• The Federal Reserve votes 8-4 to hold interest rates steady, marking the largest dissent since 1992. [2:00]
• Market resilience is highlighted as major indices remain stable despite oil price spikes and geopolitical tensions. [9:00]
• Jerome Powell delivers his final press conference as Fed chair, emphasizing the dual mandate and global uncertainties. [16:00]
• Powell addresses concerns about Fed independence amid legal challenges and political pressures. [23:00]
• Discussion centers on the Fed's 'easing bias' and the potential for future policy shifts depending on inflation and energy prices. [30:00]
• Powell reflects on his tenure, the Fed's employment mandate, and the impact of the pandemic on monetary policy. [37:00]
• Powell explains the limited impact of energy shocks on the U.S. economy compared to Europe and Asia. [45:00]
• Powell discusses the importance of legal and customary boundaries for maintaining Fed independence. [51:00]
• Powell outlines expectations for inflation to subside as tariff and energy shocks are absorbed. [59:00]
• Powell stresses the global consensus for central bank independence to ensure nonpartisan monetary policy. [1:05:00]
• Powell's term as chair ends, with Kevin Worsh expected to succeed him; market attention shifts to tech earnings. [1:09:00]
• Meta signals a tight memory chip supply, impacting hardware and data center strategies across the tech sector. [1:14:00]
• Intel and other chipmakers report ongoing CPU shortages, with expectations of continued growth through 2027. [1:21:00]
• Analysts debate which tech giant—Meta, Google, Amazon, or Microsoft—will outperform amid AI and cloud expansion. [1:27:00]
• Google Cloud posts 63% year-over-year revenue growth, outpacing AWS and Azure and signaling strong AI demand. [1:35:00]
• The market closes as investors await simultaneous earnings reports from Google, Meta, Amazon, and Microsoft. [1:42:00]
• Google, Amazon, and Microsoft beat earnings expectations, while Meta's results are clouded by a large tax benefit and increased capex. [1:46:00]
• Google Cloud's backlog nearly doubles, with major enterprise AI deals and hardware sales driving future revenue. [1:50:00]
• Meta reports a slight decline in daily active users due to geopolitical disruptions but maintains strong ad growth. [1:54:00]
• Microsoft meets cloud growth expectations, but Google Cloud's acceleration draws market attention. [1:57:00]
• Meta's Reality Labs losses shrink, but increased capex and regulatory headwinds weigh on the stock. [2:04:00]
• Analysts express skepticism about the ROI of tech giants' massive capex, especially for Meta's AI and metaverse investments. [2:12:00]
• Google details its AI full-stack strategy, highlighting advances in custom silicon, models, and enterprise adoption. [2:18:00]
• Google Cloud expands into cybersecurity with the acquisition of Wiz and new Gemini-powered defense offerings. [2:27:00]
• Alphabet posts double-digit revenue growth, with strong cash flow and a 5% dividend increase. [2:36:00]
• Google raises 2026 capex guidance and signals a significant increase for 2027 to meet AI demand. [2:44:00]
• Google executives emphasize the competitive edge of vertical AI integration and the importance of agentic commerce. [2:54:00]
• Meta CEO Mark Zuckerberg outlines the company's vision for personal and business AI agents and ongoing infrastructure investment. [3:15:00]
• Meta increases its 2026 capex outlook due to higher component prices and data center expansion, aiming to support future AI products. [3:40:00]
• Amazon's custom silicon business is highlighted as a $50 billion run-rate operation, contributing to after-hours stock gains. [4:17:00]

DETAILED ANALYSIS

Jerome Powell's final meeting as Federal Reserve chair was marked by a significant 8-4 vote to maintain the current policy rate, the largest dissent since 1992. The decision reflected deep divisions within the Federal Open Market Committee, with one member advocating for a rate cut and three expressing discomfort with the perceived easing bias in the Fed's statement. This dissent underscores the heightened uncertainty in the economic outlook, driven by persistent inflation, surging oil prices, and ongoing geopolitical risks, particularly in the Middle East.

Powell emphasized the Fed's dual mandate of maximum employment and stable prices, noting that while consumer spending and business investment remain robust, the labor market has softened and inflation expectations have risen, largely due to energy price shocks and tariffs.

Powell used his final press conference to defend the independence of the Federal Reserve, citing unprecedented legal challenges and political pressures as threats to the institution's ability to conduct monetary policy free from political influence. He announced his intention to remain on the board as a governor until ongoing legal matters are resolved, aiming to ensure a smooth transition to incoming chair Kevin Worsh. Powell reiterated the importance of central bank independence, drawing parallels to global best practices and warning that politicization of monetary policy would erode market confidence and long-term economic stability.

The market reaction to the Fed's decision was muted, with major indices showing resilience despite sharp increases in oil prices and heightened geopolitical tensions. Analysts noted the surprising stability of the S&P 500 and the continued strength of high-beta technology stocks, even as energy costs and the prospect of future rate hikes weighed on sentiment. The discussion quickly shifted to the upcoming earnings reports from the largest technology companies, which were poised to set the tone for market direction.

The earnings season for big tech was unprecedented, with Google, Microsoft, Meta, and Amazon all reporting results within a narrow window. The reports were dominated by themes of artificial intelligence, cloud infrastructure, and record capital expenditures. Google (Alphabet) delivered a standout quarter, with consolidated revenue reaching $109.9 billion, up 22% year-over-year.

The most notable achievement was Google Cloud's 63% revenue growth, far outpacing AWS and Azure. The cloud segment's backlog nearly doubled to $462 billion, driven by major enterprise AI deals and the introduction of hardware sales for Google's custom TPUs. Google announced plans to significantly increase capex in 2027, citing 'unprecedented' internal and external demand for AI compute resources.

The company also raised its quarterly dividend by 5% and highlighted strong growth in YouTube subscriptions and advertising.

Google's strategy centers on a vertically integrated AI stack, leveraging custom silicon (TPUs and CPUs), proprietary models (Gemini series), and a robust ecosystem of enterprise and consumer products. The company is expanding into cybersecurity with the acquisition of Wiz and is positioning itself as the only provider offering first-party solutions across the entire enterprise AI stack. Executives emphasized the importance of agentic commerce, with new protocols and partnerships aimed at transforming the online shopping experience through AI-driven personalization and seamless checkout.

Amazon reported strong results, with AWS accelerating to 28% year-over-year growth and the company's custom silicon business, built in partnership with Marvell, highlighted as a $50 billion run-rate operation. Amazon's capex guidance reflected continued investment in AI and cloud infrastructure, and the company benefited from a significant gain on its stake in Anthropic, which recently saw its valuation surge in private fundraising. Amazon's operating margins improved, and the company maintained a positive outlook for the remainder of the year.

Microsoft met expectations for cloud growth, with Azure and related cloud services increasing 40% year-over-year. While the company's overall results were solid, they were overshadowed by Google's outperformance in cloud and AI. Microsoft emphasized its focus on delivering AI infrastructure and solutions, with annualized AI business revenue surpassing $37 billion, up 123% year-over-year.

The company signaled ongoing investment in capex, particularly for AI-related infrastructure, and highlighted the profitability of its AI initiatives.

Meta's results were more mixed. The company reported a 33% increase in revenue to $56.3 billion, with strong gains in ad impressions and average price per ad. However, the quarter was complicated by an $8 billion tax benefit, which inflated net income and EPS.

Excluding this one-time item, Meta's profitability was still robust, but the market focused on the company's increased capex guidance—now $125 to $145 billion for 2026, up from the prior range. Most of the increase was attributed to higher component costs, particularly for memory chips, as Meta races to secure infrastructure for its AI and metaverse ambitions. Reality Labs losses narrowed, and the company reported strong growth in AI glasses, but a slight decline in daily active users due to geopolitical disruptions weighed on sentiment.

CEO Mark Zuckerberg outlined Meta's vision for personal and business AI agents, positioning the company as a leader in personal superintelligence. He emphasized the importance of building proprietary models (Muse Spark) and integrating AI deeply across Meta's platforms, from content recommendations to business tools. Zuckerberg argued that AI should amplify human potential rather than replace people, and he described a future where agents help individuals and businesses achieve their goals.

Meta is investing aggressively in infrastructure, including custom silicon and expanded data center capacity, but remains focused on operational efficiency and plans further headcount reductions to offset rising costs.

The market's reaction to the tech earnings was telling. Google shares surged after hours, driven by the cloud segment's explosive growth and bullish capex outlook. Amazon and Microsoft also saw positive moves, while Meta lagged, with investors expressing skepticism about the ROI of its massive infrastructure investments and the lack of immediate monetization from its AI initiatives.

Analysts noted that the market is rewarding companies with clear, recurring revenue streams from AI and cloud services, while those perceived as primarily cost centers—like Meta's metaverse and internal AI projects—face a valuation discount.

Throughout the earnings calls, executives from all four companies highlighted the ongoing constraints in AI compute capacity, with demand for GPUs, memory, and custom silicon outstripping supply. This dynamic is fueling a boom for semiconductor manufacturers and adjacent hardware providers, with companies like Micron, Broadcom, and Marvell benefiting from the hyperscalers' capex surge. The discussion also touched on the implications for smaller AI and cloud players, as well as the broader ecosystem of memory and data center infrastructure.

Looking ahead, the consensus among analysts and executives is that the AI investment cycle is still in its early stages. Google, in particular, signaled that 2027 will see a significant further increase in capex, reflecting confidence in the long-term demand for AI-driven products and services. The competitive landscape is shifting rapidly, with Google Cloud gaining market share and new business models emerging around agentic commerce, AI subscriptions, and enterprise solutions.

The challenge for all players will be to demonstrate a clear path to monetization and sustainable returns on these historic investments, as the market increasingly differentiates between those who can translate capex into profitable growth and those who cannot.

LINKS

• Amit Kukreja's Twitter/X profile
• Amit's Deep Dives Substack newsletter
• Amit Kukreja's new website
• Chicago meetup event link
• Amit Kukreja's Instagram profile

KEYWORDS