2026 CW44: AI and Semiconductor Highlights

Now onto the big story.

Alphabet, Microsoft, and Amazon all reported earnings last week.

And while all three showed strong AI demand, Wall Street reacted very differently.

Let's start with Microsoft.

Azure grew 48%.

And despite spending more than $45 billion on infrastructure during the quarter, Microsoft still generated $18.6 billion in free cash flow.

Investors rewarded the results.

Microsoft is increasingly demonstrating that enormous AI investments can coexist with strong cash generation.

Alphabet told a different story.

Google Cloud more than doubled its revenue, driven by enterprise AI demand and growing sales of Google's own TPU systems.

But two concerns overshadowed that growth.

First, Google's advertising business is slowing as users shift toward AI mode, which Google is still learning to monetize.

Second, Alphabet reported negative free cash flow for the second consecutive quarter, even as it plans to spend up to $205 billion this year.

its shares fell after the results.

Amazon sits somewhere in between.

A WS grew 39%, its fastest growth in nearly five years, and Amazon delivered record operating margins.

But the company also reported more than $42 billion in trailing annual free cash outflow as infrastructure investments accelerated.

And CEO Andy Jassy has already warned that spending will rise further next year.

So what does this tell us? For the past two years, investors rewarded companies for spending aggressively enough to stay competitive in AI.

More GPUs, more data centers, and more computing capacity were seen as signs of future growth.

Now the question is changing.

How quickly does that spending turn into cash? Demand isn't the problem.

Azure, AWS, and Google Cloud are all growing rapidly.

The difference is how efficiently each company can finance that growth while protecting the cash flows of its existing businesses.

My read.