AMD’s data-center revenue rose 97%. Goldman Sachs warned that state and local Democratic victories could affect 45% of planned US data-center capacity.
AI investors face two separate questions. How fast is the business growing? And how much more capacity can companies build?
The Election Split AI Stocks
Democrats took control of both houses of Congress. Bloomberg reported that the S&P 500 rose nearly 2% in early trading. Defense stocks fell as investors lowered their hopes for higher US defense spending.
AI stocks moved in different directions. In one snapshot, Amazon and Microsoft rose about 7%, while Google rose about 4%. CoreWeave fell 9%, Nebius fell 6%, and IREN fell 10%. Another snapshot showed declines across several chip and storage stocks.
Several briefs linked the AI selling to concerns about data-center construction and tighter oversight. Goldman Sachs expects any construction pauses to be short-lived. The stock moves do not show which companies might face limits, and one commentator cautioned that a morning of trading does not prove a lasting shift toward the big cloud companies.
The election also produced two different forecasts. One commentator expects the cost of living to keep worsening, though more slowly. They argue that the Iran conflict has disrupted oil production, shipping, and infrastructure, adding pressure to energy prices, inflation, and interest rates. They expect Democrats to impeach President Trump, but do not expect his removal.
Another prominent investor expects Washington to negotiate, pressure on the Fed to ease, and data-center growth to resume. He forecasts a tech rally of at least 15%. That is his forecast. For the large cloud companies, the question of whether their AI investments will earn enough is still open.
AI Revenue Is Growing. Cash and Running Costs Matter Too.
AMD reported $13.4 billion in Q3 revenue, up 45% from a year earlier and above the $13.09 billion expected. Adjusted earnings per share were $2.09, above the $1.95 estimate.
Data-center revenue reached $8.55 billion, up 97%. The reported growth was attributed to demand for Instinct GPUs and EPYC server CPUs. AMD guided for about $17 billion in Q4 revenue, above the $16.23 billion expected.
Free cash flow was $554 million, below the $1.05 billion expected. Revenue and profit grew quickly, but they did not produce the expected free cash flow this quarter.
Other reported results showed strong AI growth. Super Micro Computer revenue quadrupled to $19.9 billion. Astera Labs revenue grew 154%, Nvidia revenue doubled to $96 billion, and TSMC revenue grew 41%. One commentator argues that falling AI stock prices should be read alongside those results.
Running AI work raises another question: cost. One commentator cited a change on Vercel’s gateway. Cheap open models handled about 7% of tokens in December of last year and more than 70% in September. IBM’s CEO said open models cost 10% to 25% as much as a frontier model such as ChatGPT while being about 90% as good.
The commentator thinks a customer could use a frontier model to set up a task, then a cheaper model to run it. They see possible pressure on OpenAI, Anthropic, and GPU rental businesses that add little beyond the hardware. In their view, the cloud provider that controls the customer’s data, workflow, and choice of model has value.
Meta launched Muse, a personal AI agent with a free tier and paid plans of $20 or $100 a month. Meta says it can book appointments, fill out forms, and monitor home security feeds. Users must opt out if they do not want their interactions used to train AI models. Meta is exploring ways to earn money from shopping through agents, but has not settled on a plan.
Growth Does Not Settle the Price
Palantir’s quarterly revenue reached $2 billion for the first time, with Q4 guidance of about $2.65 billion. One commentator said its shares traded at 101 times free cash flow and was staying out. The same commentator liked Shopify’s business, which grew revenue 32%, but was not interested in its shares at 83 times free cash flow.
Reddit grew revenue 53%, while US daily active users fell 2%. Management said Google search referrals had fallen by an average of 1 million per week. The commentator called the stock cheap but questioned how durable its position is.
ServiceNow’s Q3 revenue grew 21%; the commentator pointed to weaker margin figures and slower expected growth in remaining contracted work. Intel grew revenue 21% to $16.5 billion, while the midpoint of its Q4 guidance was $15.5 billion. Fortinet grew revenue 20% and billings 29%; its CEO called AI a tailwind. Uber’s bookings grew 20%, but the commentator remained concerned about its long-term position as autonomous driving becomes more common.
Netflix presents a similar question about growth and price. One commentator cited 11% revenue growth and free cash flow approaching $10 billion to $11 billion. Their model used 15% growth over the next five years and described the shares as fairly priced for a 10% expected return. That is the commentator’s model, not a result Netflix reported.
Wells Fargo estimated a 9% decline in watch time. Netflix reported $2.7 billion in advertising against $3 billion expected. Management said member growth, pricing, and advertising could support revenue growth into 2027.
In other developments, Qualcomm will supply radio gear and software for Starlink Mobile’s planned US 5G network starting in 2027. Reuters reported that Brussels persuaded Beijing to cap hybrid-auto exports at 350,000.
Oil and Jobs Leave the Rate Question Open
Oil fell about 8%, with WTI near $88 and Brent near $95, as traders bet on a better chance of resolving the Iran war after the election. Bond yields fell too.
October private payrolls rose 86,000, and September job openings reached 7.52 million. Markets still priced a high probability of a Fed rate increase in December. Lower oil and bond yields have not removed that concern.
Fidelity reported a 10.5% rise in average 401(k) balances from March through June. Participants in their 30s averaged $75,200; those in their 40s averaged $156,800. These are account averages. Fidelity’s retirement targets are based on each worker’s income.
The AI results show strong business growth. Whether the spending earns enough, and whether the planned data centers can be built, remain separate questions.