Hello there.

Another week, another wild swing. Hey, who decided to call them the “Magnificent 7” anyway? Why not the “Overvalued 7” or the “Too Big to Fail 7”?

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Ah, well, at least we didn’t put all of our eggs in those 7 baskets… right? Please tell me there are more baskets…

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As you’ll remember from your ancient econ courses, corporations are "profit-maximizing entities." Well, here’s that theory in action. US corporate profits just hit 12.2% of the economy, which is the highest level since our grandparents were young and Elvis was still on the radio. To put that in perspective, companies have made around 8-10% of GDP for literally decades, and now they're pulling in 12%+. At least something’s going up and to the right.

The craziest part is that it isn't just tech companies printing money (though they definitely are). AI spending is turning into one of those massive investment waves that touches everything. Companies are projected to spend over a trillion dollars on AI infrastructure by 2027, and that money doesn't just disappear into server farms. It flows into construction jobs, power plants, cooling systems, and the literal rebuilding of chunks of the economy. Even boring companies you've never heard of are getting a piece of the action because someone needs to build the buildings and install the equipment for all these data centers.

Now, corporate profits are the second-highest they've been since the government started tracking this stuff in 1947. Companies are out here crushing it while regular people are still dealing with expensive groceries and rent. Politicians on both sides are starting to notice and ask questions, which means this probably won't last forever. But for now, if you're wondering why the stock market keeps going up even when everything feels chaotic, this is basically why. It’s a good time to be a Wall Street salaryman (if you can dodge the robo-replacement).

Meanwhile, big tech stocks are currently giving everyone emotional whiplash. The Nasdaq is on track for a 20% gain this quarter (its best since the pandemic recovery), but it's also been swinging around like it's possessed. One day, AI chip companies are crashing because everyone's freaking out about whether this whole AI thing is sustainable, the next day they're ripping higher because Micron dropped earnings that look like, well, how they always seem to.

The vibe right now is super weird. Companies that make AI chips and memory (the "pick-and-shovel" plays, for those of us with our Smart Guy hats on) have been absolutely crushing it. But companies that actually use all that AI infrastructure, like Apple and Microsoft, are getting hit with higher costs and passing them to customers, which is making their stocks drop. It's like everyone's trying to figure out who's actually going to make money off AI long-term, and the answer changes every 48 hours.

What's happening is that markets are trying to price in this massive AI buildout while also worrying about what happens if the hype train eventually crashes, as they tend to do. Every previous tech boom (railroads, telecom, the dot-com era) eventually imploded, even though the technology itself was legit and changed the world. So investors are basically playing hot potato, trying to make money off this trend while not being the last person holding the bag when the music stops. The second quarter ends this week, and with earnings season starting in July, we're about to find out if companies can actually justify all this excitement or if we're all just vibing off hopium.

A lot can happen in a week!

Let’s take a quick look at who struck gold and who struck out since our last issue:

Space Exploration Technologies Corp. (SPCX): +9.78%
Amazon.com, Inc. (AMZN): +2.33%
Alphabet Inc. (GOOGL): +2.13%
Taiwan Semiconductor (TSM): +0.97%
Microsoft Corporation (MSFT): +0.88%

NVIDIA Corporation (NVDA): -5.01%
Micron Technology, Inc. (MU): -4.95%
Broadcom Inc. (AVGO): -3.67%
Apple Inc. (AAPL): -2.93%
Meta Platforms, Inc. (META): -0.60%

That’s all for today. Write us and let us know your thoughts on the market, the newsletter, or the weather—we’d just love to hear from you.

Till next time,
— Brandon and Blake of Invested Inc.