Capex is back in favor
For months, raising AI spending meant selling pressure. That trade just reversed.
Microsoft, Amazon, and Alphabet all printed strong numbers and the market rewarded them:
- Alphabet: revenue +24%, Google Cloud +82%
- Microsoft: revenue +18%, Azure +43%
- Amazon: AWS +37% (fastest in five years)
Over the last five days the stocks are up 5–10%. Microsoft alone has gained ~24% since its July 29 report, adding more than $700 billion in market cap. Amazon is up a similar amount.
Steve Sosnick at Interactive Brokers put it simply: “They’re minting money in those businesses. They’re spending a lot of it, but right now the demand is there and the profits and the margins are there.” He also flagged the speed of the move: marking up multi-trillion-dollar companies 25% in a few days looks a bit meme-like. Nevertheless, markets are questioning whether just a fast move is justified so watch how the charts play out.
The spending numbers are still aggressive
Microsoft, Alphabet, Amazon, and Meta spent 64% of operating cash flow on capex in 2025. That figure is headed to **103%** by the end of 2026.
Every dollar they spend lands on someone else’s balance sheet.
Hyperscalers are catching up after lagging all year. The Mag 7 companies writing the checks are still funding the entire AI buildout while the chipmakers, power producers, cooling companies, and related suppliers cash in.
Continue to keep an eye for pocket pivots, buyable gap ups, undercut & rallies, and volume dry-ups in leading stocks that underwent or are undergoing corrections. At the same time, watch for weak rallies into resistance for possible short sale set-ups.
Global liquidity
The Fed will likely have to print dollars to prop the yen to avoid the Bank of Japan hiking rates and creating another yen carry trade disaster.
Three Options to Strengthen the Yen
- BOJ raises rates aggressively (to close the interest-rate differential with the dollar)
- Rejected: Would inflict large mark-to-market losses on the BOJ’s massive JGB holdings, raise government debt-service costs, and risk a disorderly unwind of yen-funded carry trades (as seen in the brief July 2024 spike).
- Force Japan Inc. (especially GPIF) to sell foreign assets and repatriate capital
- Rejected: Would mean large sales of U.S. Treasuries and stocks, hurting American markets that finance U.S. deficits and that Japan relies on for security guarantees.
- Preferred option – MOF uses the Fed’s FIMA repo facility
- Japan’s Ministry of Finance repos its huge U.S. Treasury holdings to the Fed → receives dollars → sells those dollars to buy yen in the FX market → reinvests the yen domestically (JGBs and stocks).
- This strengthens the yen without Japan selling Treasuries outright and without the BOJ hiking rates sharply.
- Net effect: The Fed’s balance sheet expands (it is effectively printing dollars), Japanese yields fall, Japanese stocks rise, and the yen appreciates in a more controlled manner.
A second global liquidity tailwind is out of China. They have been net buyers of gold again after having slowed their buying early this year. The price of gold reflects this trend out of china whose bottom coincided with China started to buy gold once again.
