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July 31, 2025 - Third Party

AI: The Gold Rush

The quarterly earnings season has begun, and American tech giants are making a big splash. This Wednesday, Meta (Facebook, Instagram, WhatsApp) and Microsoft released truly historic results. Beyond the numbers, there's a clear message sent to Wall Street: artificial intelligence is no longer just a promise—it's a turbocharger for profits. A closer look at a revolution in progress.

Q2 Results: Mind-blowing Numbers

META PLATFORMS

Q2 2025 Revenue: $47.5 billion (+22%).
Net profit: $18.3 billion (+38%).
Ad growth: +21%.
Earnings per share (EPS): $7.14, far above expectations.
Q3 Outlook: Growth remains above consensus.

Explanation: Meta is benefiting from explosive ad demand across its platforms, fueled by optimized targeting thanks to its new AI tools. The company's robust model and accurate forecasts took many by surprise.

MICROSOFT

Fiscal Q4 revenue: $76.4 billion (+18%).
Earnings per share: $3.65 (expected: $3.37).
Azure (cloud) growth: +34%.
Strong guidance for the next quarter.

Explanation: Microsoft is riding the smart cloud wave: its Azure division is booming, and generative AI solutions (Copilot in Office, Teams, Dynamics, etc.) are winning over major corporations globally. The company expects to invest over $30 billion in AI data centers in the coming quarter—a record.

Why These Results Change the Game

1. AI: The New Growth Engine

Meta and Microsoft have made generative and predictive AI the core of their business model. For Meta, AI boosts engagement and ad profitability: advertisers pay more to target better and sell more. At Microsoft, AI is woven into everything—productivity, cybersecurity, health, logistics—and drives Azure’s growth.

2. Market Impact: Nasdaq Takes Off

  • Following these announcements, Nasdaq shows a +1.3% pre-market jump, S&P 500 is up 1%.
  • Meta's shares leap 11–12% pre-market, Microsoft’s over 8%.
  • Microsoft is flirting with the historic $4 trillion market cap mark.

3. Sector Reshuffling: Tech Dominates All

  • The 'Magnificent Seven' phenomenon (Meta, Microsoft, Nvidia, Amazon, Apple, Alphabet, Tesla) is gaining momentum.
  • Institutional investors are dropping risky small caps (meme stocks) to focus on digital giants.
  • Tech’s weight in the S&P 500 reaches a new all-time high.

Spotlight on Winning Strategies

META: AI Serving Advertising

Meta is no longer just a social network. Its strength: monetizing AI. In-house predictive algorithms can adapt ads in real time, anticipate user behavior, and deliver superior ROI for advertisers. The company is also betting on generative AIs (text, images, videos) integrated into Instagram, Messenger, and Facebook to create new native ad formats.

MICROSOFT: Copilot, the Company’s Killer App

Copilot is the generative AI integrated into the entire Microsoft 365 suite: emails, video calls, Excel, project management, security… Adoption among businesses is massive since it brings immediate, measurable productivity gains. Add exclusive partnerships with OpenAI and the ability to invest over $30 billion in AI infrastructure (data centers, supercomputers), and you have the recipe for global leadership.

Market Sentiment: Risks & Outlook

Index Concentration: US markets’ reliance on mega-tech performance hits record levels. If the AI momentum wanes, any correction could be sharp.
Valuations Under Watch: Despite growth, Microsoft and Meta’s valuations border on excess compared to historical standards. The market is paying dearly for security and the ability to monetize AI.
Innovation or Bubble?: For now, fundamentals are solid: rising profits, margins, cash flows. But not everyone will have the firepower to keep up with the GAFAM pace.

What’s Next?

  • The next Apple and Amazon earnings will be closely scrutinized. Investors expect confirmation of the “AI super-cycle.”
  • Market outlooks remain positive as long as the Fed maintains its accommodative policy and tech growth stays strong.

Meta and Microsoft’s figures confirm: tech isn’t dead—it’s reached a whole new dimension thanks to AI. But market exuberance calls for caution and selectiveness. More than ever, it’s crucial to understand tomorrow’s growth drivers to seize the best opportunities… and avoid the pitfalls of the past.

InteractivTrading.com
July 31, 2025

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