Goldman Sachs: Margins Fade as a Risk, AI CapEx Stays Front and Centre - FJElite

From a broad macro equity perspective, the biggest focus had been profit margins, especially as companies were talking more about rising input costs and the difficulty of passing those costs on fully to customers. That pressure intensified last quarter alongside higher PPI and energy prices, which pointed to margin risk. But with energy prices having turned lower again and wage pressures still relatively soft, as the latest labour market report showed, that issue is likely to take more of a back seat this quarter.

The dominant theme remains AI capex. Last quarter, hyperscalers lifted capex guidance by more than $100bn, which helped drive another round of higher earnings estimates and outperformance across semis, memory, and broader AI infrastructure names. The main risk investors are now watching is whether hyperscalers start to signal a pullback in spending, especially after recent weakness in those stocks. But the argument here is that this still looks unlikely, with recent capital raises pointing instead to both the willingness and the ability of these companies to keep spending.