Our goal with these weekly commentaries is to highlight what we believe are the most impactful market developments. Our core belief is that we’re at a transformative and historical moment with the emergence of artificial intelligence (AI) that will reshape businesses, our economy, and our lives. While others quibble over the Fed, macro surveys, and other backward-looking indicators, we’re laser focused on what the future can bring – both near and long term. Ultimately, we believe stocks care about tomorrow more than yesterday.

What we’re hearing from the largest companies is that not only is AI real, but the results have been so promising that many are increasing their already sizable investment into this budding technology. In fact, some firms are already seeing demand outstrip their capacity to deliver AI functions. The following are AI-related highlights taken directly from earnings calls.

Microsoft

• More than 65% of the Fortune 500 now use its AI cloud service, Azure OpenAI.
• Nearly 60% of the Fortune 500 now use its AI agent, Copilot.
• AI services contributed 7 percentage points of growth, up from 6 in the prior quarter.
  • Management noted it would have been higher but demand outstripped supply.
• For its upcoming quarter, Microsoft expects capital expenditures to increase materially due to cloud and AI infrastructure investments.

Meta Platforms

• Today, about 30% of Facebook posts are delivered by its AI recommendation system, which is up 2x over the past couple of years.
• More than 50% of Instagram content is now AI recommended.
• Management now plans higher AI investments for both this year and beyond to support its ambitious AI research and product development efforts.

Alphabet

• They have developed new AI models and algorithms that are more than 100x more efficient than they were 18 months ago.
• The company has already served billions of search queries with generative AI features.
• The significant growth in capital expenditures in recent quarters reflects management’s confidence in the opportunities offered by AI across its business.

Tesla

• It continues to expand its AI training capacity, which more than doubled from the prior quarter.
• Currently, it’s using 35,000 of Nvidia chips for AI training. Management expects this to increase to 85,000 by the end of this year.
• Over 300 billion miles have been driven with the latest version of its Full Self Driving software.

AI is more than hype. It’s happening faster than most expected, and more importantly, it’s producing results. The world’s largest companies are seeing its potential and accelerating their investment in a meaningful way.

We believe this is what matters most, and we couldn’t be more excited for what the future will bring.

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The opinions expressed are those of Harrison Financial Services as of May 2, 2024 and are subject to change. There is no guarantee that any forecasts made will come to pass. This material does not constitute investment advice and is not intended as an endorsement of any specific investment or security. Please remember that all investments carry some level of risk, including the potential loss of principal invested. Past performance is not indicative of future performance. Diversification and strategic asset allocation do not assure profit or protect against loss.