AI investment cash flow conversion watch

Earnings Preview: Tomorrow is a big day for US stocks, with earnings reports from four major tech companies: Microsoft, Google, Amazon, and Meta. This is the moment of truth for the AI sector. For this round of big tech earnings, there is only one core thing to watch: Whether AI investments have started converting into cash flow that justifies CapEx, and is growing rapidly. The earnings coincide with a US stock pullback. Essentially, this recent pullback is due to overgrowth; US stocks have historically risen for 18 consecutive sessions; indices are highly concentrated, amplifying the volatility of weighted stocks; expectations have been relatively fully digested, and any new variables will trigger profit-taking. However, AI demand is strong and accelerating, mainly from top AI companies, big tech itself, and some high-value clients; supply is lagging significantly due to physical constraints like GPUs, electricity, and data centers; the supply-demand gap is huge and continues to widen. High-end computing power remains tight, resources are concentrating on high-value clients, and AI-related revenue capacity is improving. But the market is already somewhat aware of this information. What really needs to be watched is whether demand can continue to penetrate supply constraints, convert into revenue, and then into cash flow. Judgment needs to be based on three points: First, whether revenue is continuously realized, looking at cloud business, AI revenue, and usage growth; Second, whether growth is accelerating, looking at whether customer count, call volume, and unit value are increasing; Third, whether cash flow has entered an upward channel, and whether the slope is steepening. This is the most critical point. These are indicators that are much more important to the market than CapEx at present. Because only cash flow growth can support continued CapEx growth, creating a positive cycle. Otherwise, the market will fall into spending fear again, refer to the stock price performance after yesterday's amkr earnings report. Disclaimer: I hold the positions mentioned in the text, so my views are inevitably biased. The article content is not investment advice. Stock investment risks are huge; enter the market with extreme caution.