The Mag Seven Split That Separates the AI Winners from the Spenders

Good morning. This is Dylan Jovine with Behind the Markets. Happy Monday. Today is Monday, August 3rd, and I'll tell you, we've got a split decision on the Mag Seven. Boy, oh boy. And you can see the story start to break out based upon the companies, all of them are spending money, but the companies that are seeing and showing a return on that spend are starting to really take off. Specifically, we're looking at Microsoft, Amazon, and Alphabet. Those companies of the spenders, of the big, big spenders, those companies are starting to really, really, really move. You know, Microsoft, last Thursday, which we recommended recently at about $390 or so, is at $450, it went up 15% in one day. Microsoft added $500 billion, $480 billion in market cap in one day, which is a world record, a record for market cap added in one day of one period. Amazon followed suit Friday, up 10%, 15%, adding billions and billions and billions in market cap. Now first of all, let's discuss what that teaches us. That shows us that Wall Street had gotten so pessimistic on the Mag Seven that it was, it was irrational. You know, and that's the great thing about investing. When you do it long enough, and you're patient, and you know what things are worth, then investing becomes a game of, it's like having a 10-year-old underhand pitch to you, a softball, a big fat meatball there. You know, he just tosses it to you, and this is what investing is, just waiting for that meatball and, you know, and sometimes he takes a break in between, but if you just wait for those big fat underhanded meatballs, underarm pitch meatballs, you just sit there, and you could whack home runs all day long, which is kind of what we do here at Behind the Markets. We try not to make it too complicated. But anyway, you're starting to see Thursday, Microsoft, it just adds 15% in a day, which shows you how abysmal Wall Street can be when they get in their own head about the spending. Amazon Friday, Alphabet earlier than that. What you're seeing are companies that have corporate cloud customers are showing to Wall Street they're getting the return on this massive CapEx spend. They're saying, "Look, guys, we're not just spending this money willy-nilly. We are spending this money because we see a return. Our corporate clients, our S&P 1000 clients, are clamoring for these AI tools, so we are building out the infrastructure to make that possible." Contrast that with another stock that I've recommended, which did not do well, Meta, which is spending that but doesn't have the corporate infrastructure. They don't serve corporate customers, so their stock is getting hammered. So it's a split decision. I don't want to make it seem like I walk on water. But I also believe, and Mark Zuckerberg lost a lot of credibility with that whole metaverse nonsense a couple, three years ago. By the way, it was the metaverse. I've wanted to buy Meta for some years, but it was always so expensive. But it was the metaverse and him spending what was then $20 billion a quarter, you know, which sent that stock down to $96 a share, which was like, "Wow, I can't resist." Because basically, no matter what, they're gonna rein that boy in, and when they rein him in, when that board rebels, and they buck on him, then he's gonna tighten that spending up, and that stock just ran to like $700. Similar thing that I see happening right now. Zuckerberg, for Meta, you know, he's just not really showing, where's the beef. He's not really showing where the beef is, and he kind of teases out, "Maybe I'll take all this vast compute and infrastructure, and maybe I'll sell it to corporate customers like Microsoft and Google and Amazon do. Or maybe we'll create tools that are so important for our own users that they will take off and we'll need all this extra compute." But it's the lack of clarity that is crushing Meta stock. And look, I'm a buyer, so, you know, I say I'm biased, but I'm also a long-term guy. I mean, this is a company that, it's a money printing machine, it's just basically, and again, it's the old Peter Lynch line, who Warren Buffett's repeated, "Buy shares of a company that any idiot could run because sooner or later an idiot will run the company." And I'm not saying Zuckerberg's an idiot. He certainly had one big trick in him, social media, but he doesn't seem to have found his footing for any other big tricks yet. But we will see. We shall see. I'm giving him a little bit more time because the underlying numbers of the business look strong, and I see how they're using that for advertising and AI. But again, they're spending more, it seems, than they can spend just on boosting an AI infrastructuring their own business. So the question is: What are they gonna do with that? And we shall see. That jury is still out. But, you know, the smartest player here might be Apple. Apple's been marching higher too, which I have not recommended, probably stupidly perhaps. But Apple may be the smartest player because they're not spending money on infrastructure. And, you know, they're not spending money on AI. People give them a lot of hell, you know, give them a hard time for that. But as far as I see it, they might be the smartest of all these companies, you know? They're not a hyperscaler. They're not Amazon, Google, or Microsoft. They don't have corporate customers. And what Apple can do, basically, is let all the other models, everyone's saying you should create an AI model, like Anthropic or OpenAI, they can let all those companies fight it out and spend trillions of dollars building their models up, and Apple, basically it owns the bridge to consumer town. You know, basically most humans interact with the internet, at least in America, with either a Android system or an Apple. Apple basically owns the smartphone market, certainly the high return on capital margins, really the profitable segment. So whichever one of you guys wins the fight, that's fine with us. You guys spend the money, make the product good, and then we'll decide how it's gonna look going to our customers. So, you know, again, this speaks to this kind of balance of power, where these models risk becoming commoditized, really, unless they really kind of get supersede leverage, which is why a lot of these companies are trying to work with businesses to customize AI agents. OpenAI's trying to build some devices, famously with Jony Ive, the guy who helped Steve Jobs design the iPhone. They're trying to build devices to really kind of rethink how we use AI. But Apple has a lock on that. So if I'm Apple, I'm sitting down there and you know, they're like me. They're waiting for that big meatball pitch to come to them. You guys fight it all out, destroy shareholder value, and we'll see what happens after that. So far with the Mag Seven, the ones that have reported, we have seen a split decision thus far, and it really tells you about the AI narrative. But while everybody is turned off to Mag Seven, that's why we've been recommending them lately. Anyway, that's all I have for you today. Don't make this harder than it needs to be. Don't make investing harder than it needs to be. Our good friend Harold said, he's really picked up on the game here. You know, you find good companies that have really strong chokeholds in a certain area, and you wait for them to come into your buy price, and you just go, "Pop!" And then you go back to having fun. Anyway, that's all I have for you today. Have a wonderful day. I'll see you tomorrow.