A latest article by the Wall Avenue Journal entitled “Turbocharged Earnings Are Pushing Shares Increased”. There’s a Catch raises an necessary situation for traders of the megacap AI-tech firms. Wall Avenue analysts count on earnings development to high 20% for a second consecutive quarter; nevertheless, the earnings development shouldn’t be widespread.
The predominant bulk of the earnings development is being pushed by semiconductor makers and AI infrastructure firms. Todd Castagno, a Morgan Stanley analyst, questions how lengthy some tech firms can proceed to develop earnings at such historic charges. To wit, he deems the present interval of development as “a golden window the place everyone seems to be good.” The rationale for his pessimism is how hyperscalers account for bills.
When sells a chip, it books income instantly. However the hyperscalers shopping for these chips (, , , , and ) deal with the bills as capital belongings, permitting them to unfold the price over years as depreciation. On an aggregated foundation, the income hits as earnings right now, however the bills are restricted. For context, the 5 main hyperscalers spent $412 billion in capital expenditures in 2025, with estimates for 2026 reaching $760 billion. Depreciation bills for 2026 are estimated at solely $211 billion. The $549 billion hole will in the end be accounted for.
The underside line is that there are important, rising bills that may hit hyperscalers’ earnings statements sooner or later. Can income increase shortly sufficient to offset the approaching bulge in bills? Answering the query is difficult, making it tough to foretell margins for 2028 and past. Per the article:
And, as Zion Analysis Group founder David Zion says, “analyst depreciation estimates for every of those firms are all over.” He says that the “consensus D&A (depreciation and amortization) estimates might be systematically understated.”
Financial system
SK Hynix Provides To The Fairness Provide Surge
On Tuesday evening, Korean reminiscence chip maker SK Hynix introduced plans for a $29.4 billion US itemizing. This is able to be the largest American Depositary Receipt providing in historical past, surpassing Alibaba’s $25 billion 2014 debut. The providing is anticipated to start buying and selling on July 10.
Now we have written a number of commentaries and articles on the approaching surge in fairness issuance. In , we liken the brand new issuance to including marbles to a jar. To wit:
“Consider the inventory market as a jar stuffed with marbles. For the brand new SpaceX and different marbles to slot in the jar, both the jar should be enlarged, or a number of the different marbles should shrink.
Given the present financial setting, the jar, or out there capital, is unlikely to develop considerably. The Fed is now not offering the flood of liquidity that enabled the straightforward digestion of the SPAC growth in 2020 and 2021. Charges are increased, financial savings charges are decrease, and the fairness market is already buying and selling at elevated valuations. Merely put, there isn’t a lot additional liquidity. Thus, the opposite choice is for the collective market cap of the whole lot else to say no.
In actuality, there will probably be some shrinkage of marbles and an enlargement of the jar. The extent of each will assist decide how the IPO growth is acquired and its influence on different shares. “
The latest marble, so to talk, arrives weeks after the IPO and in opposition to a pipeline of IPOs, Anthropic, and OpenAI, in addition to secondary choices from most of the giant hyperscalers.
SK Hynix’s strategic logic is easy. SK Hynix trades at a significant low cost to , regardless of being the dominant provider of high-bandwidth reminiscence chips that energy Nvidia’s AI GPU stacks. A US itemizing provides the corporate entry to a deeper, extra liquid investor base. Taiwan Semiconductors did the same providing, and its US ADR trades at a persistent premium to its Taiwan-listed shares.
As proven beneath, SK Hynix shares have already surged 300% in 2026 and greater than 800% over the past full 12 months, pushed by robust HBM demand. The US itemizing provides American traders a direct path into that commerce however provides extra provide to a rising wave of provide.
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