After Wednesday's New York stock market closing bell is "a huge night for the tech world" and the US artificial intelligence sector, analysts said, as Microsoft Corp (NASDAQ:MSFT), Facebook owner Meta Platforms Inc (NASDAQ:META, ETR:FB2A, SWX:FB) and Tesla Inc (NASDAQ:TSLA) all unveil earnings.
What makes the stakes even higher is that these earnings arrive fresh off the back of the DeepSeek announcement, which led to many questioning the massive capital spending by members of the 'Magnificent 7' tech giants on rolling out AI models.
The trio reporting results tonight are estimated to be planning on spending around $2 trillion on AI related capital expenditure over the next three years, said Wedbush analyst Dan Ives, which means a lot of hope for others like Nvidia is also hanging on these earnings and the guidance for 2025.
The question about DeepSeek that sent markets tumbling has been, said Ives, "if DeepSeek can build this model for $6 million why is big tech spending $400 billion-plus of cap-ex this year?"
But he said this is "a flawed bear argument" as the $6 million claims are implausible and any improvement in efficiency and costs, if DeepSeek is half right, are a "win/win" for the hyperscalers like Microsoft, Meta, Google and Amazon as more enterprises head down the AI path means "more innovation and cheaper LLM models which will just launch more and bigger AI endeavors".
Ives said he "fully expects" Microsoft's Satya Nadella to reiterate his $80 billion capex target on tonight's earnings call and for Meta CEO Mark Zuckerberg to "double down" on the Instagram and WhatsApp owner's 2025 $60-65 billion number.
Based on research by his Wedbush team, Ives calculated that over the next three years over 70% of Microsoft's installed enterprise/commercial user base will ultimately move to using the company's AI functionality.,
This "changes the landscape" for Nadella and co, he said, as 2025 will be "the true inflection year of AI growth with pricing, beta customers, and use cases all rolled out".
AI revenues are on track to surpass an annual revenue run rate of $10 billion this quarter, the analyst said.
As for Meta's earnings report, Ives said it is investing in the infrastructure capacity for its current business and laying the groundwork for future growth drivers, including deeper automation of advertiser creative, improvements in Meta AI, expansion of AI agents for business, and further integration of genAI in new Meta hardware products.
"There is significant monetization opportunity ahead for Meta as the company brings generative AI features and content to its circa 3.3 billion daily active users."
Finally, Ives believes Tesla "could reach a $2 trillion market cap by the end of 2025 as the company's autonomous vision starts to take shape along with very solid Tesla delivery demand we expect from the core China market in 2025".
To this end, he was crossing his fingers for "positive commentary" from boss Elon Musk and his colleagues on tonight's earnings call.