Google Rips, Meta Dumps, Japanese Yen Spikes on Intervention Warning

追加: 2026-05-06

[00:00:05]All right. Good morning everybody.

[00:00:14]Good morning all you magnificent melon heads of the world. Happy Thursday everybody. Today's April 30th, 2026.

[00:00:22]Man, that was a fast month, wasn't it?

[00:00:24]April flew by. Hey, our top stories this morning. We have got a deluge of meggaap big tech earnings that just came out. We are going to go through each and every one of those. And we've also got one eye on what's going on in Japan. August 2024 called They want their headlines back.

[00:00:45]Keep one eye on Japan, guys. That is interesting going on this morning. But first, big tech. All right. We we had a just absolutely drinking from the fire hose of earnings yesterday. Four of the Mag Seven reported Meta, Google, Amazon, and Microsoft. And if I could summarize it, I would say Google RIPS, Meta dumps.

[00:01:04]That was the takeaway here. First, let's go with Meta. Meta increased their capex again by a whopping $10 billion. All right, more money going in the furnace over at Meta. That's kind of how Mark Zuckerberg rolls. And well, even though they posted strong earnings, the market did not like that big increase in capex.

[00:01:24]Now, Meta's earnings were pretty good and they're out there. They're trying to say, "Oh, it's our investments or AI.

[00:01:30]You're paying off in our core business."

[00:01:32]That's not what happened. Meta, first of all, they raised their ad prices.

[00:01:36]They're charging people more inflation.

[00:01:38]Congratulations. And they're also jamming 19% more ads down the throats of their users. It's not AI that's doing that. You're just you're just cramming more ads into your content. Uh so Meta was definitely the worst performer of the big tech companies that reported yesterday. Now the best performer by a huge margin was Google. That stock is on a tear this morning. Revenue up 22% most of that driven by their cloud division.

[00:02:04]Net income up 81%.

[00:02:08]A huge jump in income for Google. And wait but wait. All right. They kind of fudged it a little bit. It's legit. It's legal. but a $ 37.7 billion gain on non-marketable securities. In other words, anthropic. All right, more than half or basically the entirety of their gain in net income was just Google increasing the value on paper of their stake in Anthropic. And you might be saying, hey, look, that's maybe that's legitimate. Anthropic's coding tools are awesome. Clo I I vibe coded Microsoft Office or something like that. Okay, software developers love Claude. We get it. But Anthropic is a cash burning business like all AI companies are. So a $ 37 billion increase in their Anthropic stake and then poof, an 81% growth in net income. Uh it's a stretch, but the market likes it. Google stock is ripping on that. Also, Google increased their capex by a more modest $5 billion. And well, I I guess if you count that net income growth, the market is looking at that and saying, well, at least Google has a return on their investment or the appearance of a return on investment.

[00:03:21]And so shareholders liked that one. Now, Amazon and Microsoft also reported not as big a move as Meta and Google. Amazon posted uh AWS revenue growth of 28%.

[00:03:32]Again, almost exclusively driven by anthropic, I'm sure. But Amazon's free cash flow, it's virtually gone. Down 95% yearover-year to just $1.2 billion. You know what? You can book one-time gains.

[00:03:47]You can mess with your tax treatments.

[00:03:50]You can change your depreciation schedules in order to adjust your earnings. You could mark up your stake in anthropic. But you know what? You can't fake is money in the bank. And Amazon has a hell of a lot less of it.

[00:04:03]And so do all of these names that just reported. Their free cash flow, it's virtually gone, exhausted. That's why a lot of these companies are turning to private credit and offbalance sheet special purpose vehicles. Enron, please call your office. Yeah. So, Amazon, that free cash flow, that stock's not doing terrible, but it's certainly something to watch out for there. Microsoft also reported their earnings. Azure revenue, that's their cloud division revenue growth of 40% all driven by open AI there. Uh Microsoft's capex of $ 31.9 billion. Now that was up 49% year-over-year, but it did come in a little bit below expectations. Some people were a little bit disappointed, but they didn't exactly cut their capex.

[00:04:50]They just spent a little less than had forecast. And then of course their guidance for future capex of $190 billion was increased. Markets not really liking that. So look the takeaway from the four big earnings yesterday.

[00:05:04]Free cash flows going up in smoke.

[00:05:07]Revenue is increasing mostly because openi open aai and anthropic have a whole bunch of investor capital to continue burning into these cloud divisions that big tech provides. U free cash flow gone. Capex still going strong. And we've got a chart that's going to show you just how obscene that capex is really becoming. We also had Caterpillar earnings, another data center company. C. You'd think Caterpillar sells bulldozers. No, silly rabbit. They're now a data center company because they're selling so many engines and generators because the data centers can't get power anywhere else.

[00:05:38]So all the companies that were environmentalists a few years ago, now they're all burning diesel, coal, and gas to power their bots. But hey, that's all right. We'll talk about that later. Caterpillar earnings 23% revenue growth in their energy unit. The stock is up 6%. Okay, Caterpillar is now a tech company. I get it. Um, now while all that is going on in the backdrop, we've got this story yesterday about Brookfield has bailed on a gigawatt data center in Northern Virginia. This data center, it was it was going to be one of, if not the biggest data centers in the country. And well, they the judge threw out the zoning ruling. There was this guy ran on the zoning board in this area. He ran exclusively on stopping data center expansions and he won. And shortly before he moved into office, the previous guy held an allnight marathon session to basically jam through approval of this massive data center.

[00:06:35]They didn't follow the rules about public disclosures and advanced notice of the meeting. And so a judge threw out that zoning ruling. And now the new guy is of course going to reject it. So this is public backlash against data centers cancelling a gigawatt project and you are going to see more and more headlines like this in the months ahead. There's almost universal opposition to data center construction now anywhere outside of Silicon Valley. That is all right. Meanwhile, we've got Japan.

[00:07:02]Uh keep an eye on Japan, guys. That yen carry trade unwind is probably going to be back in the news soon here. The yen strengthened sharply overnight from 160 to the dollar down to as low as 155 a half to the dollar. Their FX chief uh Assushi Mimura, I'm sure I mispronounced that. I apologize. She issued what she called her final warning to the yen shorts basically suggesting that the the finance bureau is going to be intervening in the forex market to strengthen the yen. She's she's jawboning and she's jawboning hard saying get out of your yen shorts because here we come. And of course, people listened. The yen strengthened substantially. Even as that is going on, the Bank of Japan had their meeting yesterday. Now, they left rates steady, which was expected, but three of their nine members voted to hike interest rates. So that would suggest that at the next meeting, the BOJ is probably going to raise rates even as the Finance Bureau is is jawboning the yen stronger.

[00:08:03]So what do you have? You've got a rapidly strengthening currency and rapidly rising interest rates on the long end of the Japanese yield curve this morning. Oh crap, that yen carry trade thing. It's coming back. Michael Ged is going to be just unbearable today. Okay, so that's going on. Uh now also we had the Fed voted yesterday. the FOMC press conference. It was largely a Trump bashing session. They said pretty much nothing at the press conference.

[00:08:29]The interesting thing about the Fed yesterday though is it was an 8 to4 vote to leave rates where they were. Now, one of the no votes was Steven Moran. He wanted to cut rates as he always does.

[00:08:42]That's just how he rolls. Three of the other four people did want to leave rates alone, but they wanted to get rid of the easing bias from the statement.

[00:08:52]They basically wanted to get rid of the statement that said if we do anything we're going to cut, which means they're leaning at least equally towards hiking as they were cutting. That was interpreted as somewhat hawkish, weekly hawkish, a little more than the market was expecting, but other than that, the Fed meeting yesterday was a non-event.

[00:09:11]And we also got some data just came out this morning. Personal consumption expenditures, that's the Federal Reserve's preferred measure of inflation, up sharply to 3.5% from 2.8% in February. Core PCE was also up at 3.2% for up from 3.0. Uh interesting to see core rising. It's a little early to to expect the oil price increases to show up in core. So maybe that's tariffs were driving the increase in core PCE. Uh, but that headline number 3.5 up from 2.8. You better believe that is all gasoline, baby. That is the war in Iran driving that higher, guys. Inflation is back on the menu.

[00:09:51]It's coming. We can all see it. Also, inflation and the price of oil definitely playing a role in those monetary policy actions coming out of Japan. Japan is one of the single most vulnerable countries, a very modernized economy with virtually zero natural resources. They are in the bullseye of those higher energy prices here. And we also got the advanced estimate for first quarter GDP. US economy grew at an estimated 2.0% in the first quarter. Uh that's below the 2.3% that was expected and but up from 0.5% in the fourth quarter of last year. Guys, we got a lot going on today.

[00:10:30]Why don't we shrink my big melon of a head and let's see what's going on in the world of finance. Don't forget that like button and that subscribe button for the YouTube algorithms. We do this one every single day. So, come have your coffee with the melon heads. Right now, the S&P 500 is higher by 38 points or about a half a percent. For the time being, the market is kind of shrugging off big tech earnings. Some good, some bad, some red, some green, but the market is up slightly here, at least for now. We'll see what happens when the bell rings. The Dow is up by 317 points or 65% in the green and the Nasdaq higher by 210 points 77% higher. Google a big driver of those gains in the NASDAQ this morning. DXY is weaker by 48 basis points this morning. A sharp move lower in the dollar that is being driven by the yen. We'll look at that chart in just a second here. Also, let's take a look at Bitcoin. Bitcoin is higher by about $560 here. $76,313 for Bitcoin is priced on Coinbase this morning. And looking over at the commodities board, we've got gold is sharply higher here, $4,640 an ounce for spot gold. That's up by 97 bucks or 2.13%.

[00:11:45]We've got oil is lower. Stocks are up.

[00:11:47]Gold and silver still behaving like risk assets. It makes me a little nervous to see that to be honest with you. But I own a lot of the shiny so I like to see the prices going up. I just I want to see them going up for the right reason.

[00:11:59]Hey, the weaker dollar. Okay, that's probably contributing quite a bit here.

[00:12:03]So I guess that correlation makes sense.

[00:12:05]Spot silver $7361.

[00:12:08]That's higher by $220.

[00:12:11]Uh 3.2% higher. And again, I like the shiny. Copper is higher by 79%. Platinum higher by 3.3%. Palladium higher by one and a quarter percent. And WTI is lower by 2% at $104.79 on nothing. No news whatsoever. Oil was as high. WTI was as high as 11090, almost 111 bucks this morning. Now we're at 104.76.

[00:12:39]I don't know on what. Maybe just a partial unwind of that big move we had yesterday. Oil had a pretty substantial move yesterday on news of that blockade just going on for basically forever apparently. U there was also news that the US was preparing a limited strike package on Iran. I don't know what that means. Oil for whatever reason is moving lower for now.

[00:13:03]All right, let's talk about the bond market. Not a lot going on in US bonds this morning. All right, the 30-year yield is lower by about 1.4.978%.

[00:13:12]The 10-year is lower by three points in change, 4.386.

[00:13:17]The 2-year is at 3.896. That's lower by 3 and a half points. And the one month is unchanged at 4.639.

[00:13:25]Uh, one thing I would point out about the US bond market. This is the CME's Fed watch tool. This is gauging what they think the Fed's prime rate will be at the end of December, basically at the end of the year. Right now, there's an 83% chance after that press conference yesterday. an 83% chance that the Fed does nothing for the rest of the year.

[00:13:46]And we've got a pretty even split now.

[00:13:49]We got about a 10% chance that the Fed cuts once between now and the end of the year. But this is a new development here. This 6.6% chance that we actually get a rate hike between now and the end of the year. Market just beginning to price in the possibility that the Fed might go back to raising rates here. But back on to bonds. It's not the US bonds I want to draw your attention to. We are scrolling all the way back up to the Japanese bond market this morning. Okay, big moves in Japanese bonds in particular. I want to show you guys the big moves on the long end here. The Japanese 40-year is higher by 11 basis points. The 30-year by 10 basis points.

[00:14:29]The 20-year by nine, 15 is up by 11 almost 12 basis points. And the 10-year yield is up by five. A big move on the long end of the Japanese yield curve this morning. You don't usually get big moves like that in Japan. All right, Japan spent most of the last decade near zero interest rates. So the big moves higher. Let's talk about what's going on in Japan here. Bank of Japan keeps rates steady, but hawkish split points to June hike. All right, there's Kazua, the head of the Bank of Japan. Uh that this is pretty substantial here. The Bank of Japan kept interest rates steady on Tuesday, but three of its nine member board proposed hiking borrowing costs, signaling policymakers concerns over inflationary pressures from the Middle East conflict. The central bank also sharply revised up its price forecasts and stressed vigilance to the risk of an inflation overshoot, signaling a strong chance of a rate hike in coming months.

[00:15:25]All right, so this is kind of in line with what the Feds did yesterday, although this is a lot stronger language than the Fed, right? We had those three Fed governors voted against the statement because they wanted to remove the dovish bias, which means they still wanted to do nothing on interest rates.

[00:15:40]They just didn't want to suggest that their next move would be a cut, which would suggest that they think the next move could be a hike. So, you've got something similar going on in Japan here. They left rates unchanged, but three of the nine members wanted to raise rates. And why? Because of inflation, because of oil prices. So, that's driving that big move higher in Japanese borrowing costs this morning.

[00:16:03]And and look, uh, Japanese, this is the Japanese 10-year yield. This thing has been marching higher pretty much for the last two years at a steady clip here, currently at 2.519%.

[00:16:15]But the bigger news out of Japan, that was big news from the BOJ, their hawkish tilt. But also, you've got this one.

[00:16:21]Japan issues final warning before intervention lifting the yen. You've got some strong jawbon coming out of the finance ministry here this morning.

[00:16:31]Japan's top currency officials rolled out their final warning to speculators after the yen slipped to its weakest level since the nation's last salvo of market interventions in 2024. You may recall in 2024 that kicked off the yen carry trade panic on August 5th that saw several thousand point down days in the Dow. Um, ultimately they backed off of that and the market recovered and moved on to higher highs. But here's what they had to say. Let me say this as my final advisory if you want to escape. FX chief at Sushi Memorial said in Tokyo on Thursday. Final advisory if you want to escape. She is talking to the yen shorts. She is saying cover your yen shorts. Sell your US assets to get the dollars back. convert those dollars back into yens and pay back the yen that you borrowed. In other words, unwind the yen carry trade before I start intervening in the FX market and I blow up your trades. His comments followed shortly after a ramped up message from Finance Minister Satsuki Katyama who said, "The time for taking bold steps is now nearing. The phrase bold steps typically refers to currency intervention when spoken by Japanese finance officials."

[00:17:43]Mamora added that he was in contact with his US counterpart around the clock, hinting that they had a green light from Washington to take action if needed.

[00:17:52]Warnings helped firm up the yen to as much as 159 from as much as 159.23 against the dollar. The latest bound of weakness or the latest bout of weakness in the yen comes in the wake of decisions this week by the Bank of Japan and the US Federal Reserve to hold policy settings steady. The interest rate differential between the US and Japan has been a factor weighing on the currency. Tensions in the Middle East and soaring oil prices are other elements in play. And look at what happened to the yen this morning. This these are daily candles here. Big red candle again. When this chart moves lower, that is the yen strengthening against the dollar. This is the USD JPY chart or the number of yen it takes to make $1. And we were as high last night as 160.4 4 yen to the dollar. And then after those statements, we went as low as 155.5 yen to the dollar, currently at 156. Now, let's zoom way back on this chart all the way to that yen carry trade panic that we had back in 2024.

[00:18:54]This was that panic. All right, we had several days of this. So the move we had today was about one quarter of the total move that we had in that big panic back in 2024. So still a far cry from what happened that summer. But if this were to continue for several days, we could be talking about a similar effect on US markets. Again, that the Japanese yen, the cheap borrowed yen, has been the driver of asset prices all over the world for years. And the Bank of Japan is trying to slowly step back from that.

[00:19:28]And some unusually strong language from them this morning, which means if you're short the yen, whatever you bought with those yen you borrowed, you better sell it and convert that currency back into yen, which means US assets and selling dollars. Convert it back into yen and pay back that debt because we're about to make the yen a hell of a lot harder to pay back.

[00:19:49]All right, now on to big tech. Let's start with Meta. The stock falls sharply after strong earnings. Here's what's dragging it down. In Baronss this morning, Meta Platforms beat expectations for its first quarter earnings results on Wednesday. Its shares were still down 8% in pre-market trading on Thursday. The stock reaction is likely driven by the company's announcement that it would be raising capital expenditures for the year. Mark Zuckerberg just loves to burn that money. The company's forecast range for capex is now 135 billion at the midpoint versus 125 billion previously. The capex is putting pressure on free cash flow and this quarter. Meta opted not to buy back any stock. Last year it spent nearly $13 billion on share repurchases.

[00:20:34]Now adjusted earnings per share were $1044, well ahead of Wall Street's consensus estimate of 667 and up from 643 last year. The big beat was driven by a large tax benefit. Though excluding its effect on earnings, Meta still had EPS of 731. Revenue for the quarter reached 56.3 billion, more than expectations for 55.6.

[00:20:55]Though users only rose by 4% from last year to 3.6 billion. Meta showed them 19% more ads and were able to keep ad prices rising at the same time by 12%.

[00:21:08]The success Meta is recently having with soaring impressions coupled with higher prices may indicate its artificial intelligence initiatives in engagement and ad targeting are already reaping benefits. And that's just the dumbest thing I've ever read. They just went and showed you that told you with that that information. Meta is jamming more ads down people's throats and they're charging them more for them, the advertisers, and then they're saying because AI is why we're making more money. No, you're just devaluing your product with more garbage that people don't want to see. Gee, you think maybe that's why your user growth is sluggish?

[00:21:42]I just throw them out there. And meanwhile, they're burning more money at the altar of artificial intelligence.

[00:21:48]And the stock is reacting appropriately, down 8.2%, $61,49 for Meta, down by 54 bucks this morning.

[00:21:56]Okay, that's the bad. Let's talk about the good or the goodish. Google profit jumps 81% as cloud business booms.

[00:22:05]Artificial intelligence is lighting up every part of the business said CEO CEO Sundar Pachai. I don't know so much about that but Google parent company Alphabet reported a 22% surge in first quarter revenue as the AI race fuels growth of its cloud business. Alphabet sales reached about $ 110 billion exceeding analyst estimates. Net income was 62.6 6 billion, an 81% increase compared with the same period last year.

[00:22:32]And again, that number there, that looks great, net income up 81%, big returns on their investments in AI. But remember, all of that gain, a $ 37.7 billion gain on marking up the value of securities, which you can only assume is their stake in anthropic. So, all right, is that the investment paying off? You could argue that or you could argue this is a paper manipulation of an asset that's notoriously difficult to value that hasn't even IPOed yet. And basically the entirety of their gain in net income was driven by that one accounting maneuver marking up the value in anthropic. The costly bet that Alphabet has made on AI appears to be paying off with enterprise AI solutions and demand for computing power driving cloud unit growth. Again, all that cloud unit growth, that's that's Anthropic spending their money on Google Cloud.

[00:23:26]So, if you take away Anthropic, these numbers just die on the vine. So, uh very high exposure to Anthropic here over at Google. Like other tech giants, Alphabet is spending heavily to advance its AI models and build data centers needed to train and run them. The company revised its estimates for capital expenditures this year to 180 billion to 190 up from 175 to 185. So a smaller increase in capex when compared to Meta but an increase nonetheless although investors are looking past that because of Google's good numbers.

[00:23:58]Alphabet stock is ripping this morning up nearly 7% 6.87% higher $37125 for Alphabet higher by almost 24 bucks.

[00:24:10]We also got earnings from Amazon.

[00:24:11]Amazon's AI spending boom is eating into free cash flow. And you know what? You could delete Amazon there and you could just use this headline for every one of these companies because this is true.

[00:24:23]All the spending boom is eating into free cash flow. Accounting gimmicks, marking up securities, investments, roundtpping gimmicks, tax charges, all that Extension of your depreciation schedules. You can make your earnings say whatever you want, but you can't fake money in the bank. And Amazon is almost out of it. Amazon's earnings beat came with a catch. The e-commerce and cloud computing giant delivered a strong first quarter on the surface, beating Wall Street estimates for revenue and operating income, while Amazon Web Services, its cloud operation, posted its fastest growth in 15 quarters. Again, that's all anthropic, spending money it doesn't earn on AWS compute. But the report also showed the cost of Amazon's artificial intelligence push free cash flow nearly disappeared. Look at this chart of free cash flow going back the last few years.

[00:25:13]Just 1.2 billion dollars of free cash flow down 95% year-over-year. All right.

[00:25:20]How are they going to keep this up? If if they've only got another 1.2 billion and they plan to spend a hundred and whatever billion dollars on Cabex, where are they going to get that money? I guess they're going to be dipping into the debt market here. Free cash flow is the money a company has left after operating in business and funding major investments. In Amazon's case, that number fell 95% to just 1.2 billion over the past 12 months, down from nearly 26 billion a year earlier, according to the company's earnings presentation. And that happened even as operating cash flow rose 30%.

[00:25:52]The reason is simple. Amazon is making more cash from its business, but it's spending almost all of it on AI infrastructure, and that's the tension investors are weighing after the quarter that otherwise looks strong. Revenue from AWS rose 28% to 37.6 billion ahead of Wall Street expectations, but some analysts noted AWS growth may still have fallen short of what big investors were looking for, especially after Amazon's stock rallied into the print. But for now, Amazon stock is looking all right this morning, up 3.6%. investors are are glossing over that evaporation of free cash flow and they're focusing on the cloud numbers. $272 a share up by $9.38 this morning.

[00:26:34]And the last of the big tech earnings, Microsoft stock slides after earnings what overshadowed strong cloud growth?

[00:26:42]Well, you could probably guess Microsoft stock was sliding on Thursday after the tech giant's lofty capital spending guidance over shadow overshadowed solid growth for its Azure cloud computing business. Microsoft late Wednesday reported adjusted earnings of 427 a share on revenue of 82.9 billion for the third quarter. Analysts had expected 405 a share on revenue of 81.4. So, it's a big beat on both top and bottom.

[00:27:09]Microsoft said that revenue for Azure grew 40% from the prior year. That is all spending by OpenAI. Who loses money?

[00:27:16]But I digress. Outpacing the estimate for 37.9% growth analysts expected. The company expects fiscal fourth quarter Azure revenue to grow between 39 and 40% which is ahead of Wall Street's estimates. But that capex it gets you every time. Capex for the quarter. 31.9 billion up 49%. That's year-over-year.

[00:27:36]It was actually down quarter over quarter. Free cash flow, meanwhile, dropped 22% to 15.8 billion. Again, money in the bank is shrinking. Not as bad as over at Amazon or at Meta, but the same thing in the same direction.

[00:27:51]That's due to higher investments that Microsoft is making as cloud demand rises. Microsoft said on its earnings call that it expects second quarter capex spend to increase to over $40 billion. For the year, Microsoft said it expects to invest about 190 billion in capex. That's well ahead of Wall Street's current 2026 estimate of 160 billion. More money into the fire and Microsoft stock down about one and a half% on that news. $4181 off by six bucks this morning. All right, so common themes here, cloud growth across the board except for Meta who's jamming more ads down people's throat. All the CEOs are like, "Yay, yay. Yay AI." Meanwhile, free cash flow is going up in smoke because they're burning too much money on capex. And most investors don't like that. And how much money are they burning? Well, it's funny you should ask that. Almost 750 billion bucks is projected through the end of the year. US hyperscalers ratchet up 2026 capex plans past 700 billion.

[00:28:54]Look at how much money they are burning on this gamble. To say these companies are all in on AI would be to put it mildly.

[00:29:02]If this bubble bursts, I don't know that they all make it to be honest with you.

[00:29:06]Or maybe one of them gets gobbled up. I I I don't know. But here's Microsoft in blue, Meta in gray, Google in black, and Amazon in we'll call that orange. U all growing big this year. And again, where's the return on investment? Where is it? You know, you they're they're marking up their stake in anthropic.

[00:29:25]They can mark up their stakes in open AI. They could jam more ads down people's throats. But the at the end of the day, their AI businesses are not profitable or are being driven by unprofitable businesses burning other people's money to stay alive. How long can it go on for?

[00:29:42]Meanwhile, Caterpillar apparently is an AI company, right? What stage? We already we have all these silly science fiction headlines about beaming solar power from space and fusion power plants on the moon. Sure, why not? Caterpillar beats estimates as AI boom spurs power sales. The bulldozer company is now an AI company. That's how far we've come.

[00:30:02]Caterpillar posted first quarter earnings that beat Wall Street expectations as surging electricity demand from AI data centers boosted sales of the company's power generation equipment. Uh the manu the machinery manufacturer said in a statement Thursday per share profit excluding onetime items was 5.54 in the period compared to 425 a share a year earlier and well ahead of analyst estimates of 463.

[00:30:25]The part of the business that sells generators, engines and gas turbines used in industrial facilities and large-scale computing centers. And those items are being snapped up amid red-hot demand for electricity to power data centers. That's helped Caterpillar shares to more than double in value over the past year. Again, take that in.

[00:30:43]Caterpillar, the bulldozer company stock has doubled because of data centers.

[00:30:48]That is not sustainable. Caterpillar is certainly benefiting from the AI buildout, said Deck Malarkey, managing director at SLC management. And given there is no letup in related capex, which has been confirmed in this earning season, Caterpillar will continue to be an essential player in all that. First quarter revenue from the company's machinery, power, and energy unit increased 23% to $16.4 billion, topping estimates. Sales of Caterpillar's signature yellow construction machinery jumped 38%. And again, that construction machinery is almost certainly being bought for the purpose of building data centers. Caterpillar stock is ripping this morning, up 6.1%, $860, higher by 49 bucks. The stock is up 163% over the last 12 months.

[00:31:37]Even as that is going on, we're starting to get headlines like this. And you better believe you're going to see more and more stories like this. Brookfield's Compass bails on massive Virginia data center. This one broke yesterday.

[00:31:50]Compass Data Centers is pulling out of a year'slong effort to build a key part of a 2,100 acre data center corridor in Northern Virginia after the development faced intense push back from local residents. The Brookfield Asset Managementbacked Data Center Company has spent years trying to secure Prince William County's blessings to develop more than 800 acres of the project.

[00:32:12]After sinking tens of millions of dollars into the plan, Dallas-based Compass decided that public opposition and state lawmakers growing resistance to providing tax breaks created too many roadblocks. According to people familiar with the matter, the pivot underscores how the tide is turning against data centers, complicating the ambitions of the developers and investors that bankroll them. Compass's project along with plans by Blackston's back QTS to develop an adjacent 800 plus acres would have created one of the largest global data center hubs and reinforce Northern Virginia status as the industry's global capital. Both companies rode the AI boom and grew rapidly on the back of surging demand for power and properties to run computing processes. Now though, the industry is forced to spend ever more money and time to persuade towns, counties, and politicians that the economic benefits are worth the costs.

[00:33:05]Public push back to these mammoth structures and their enormous electricity needs is now forcing data center companies to confront the limits of growth. We're starting to see this, guys. We had a story about Wisconsin over the weekend. I was talking about this with my friend George Noble on his Twitter space. Wisconsin's zoning commission just or their public service commission just basically passed a ruling that says all these data centers need to build their own power plants.

[00:33:30]They're not allowed to connect to the grid and drive up everybody else's power prices. That's going to make those data centers much more expensive. Here you've got a gigawatt data center in Virginia that's about to get cancelled because the zoning board tried to ram it through in the middle of the night after the head of the zoning board got voted out because a guy campaigned for the sole purpose of killing data center projects and he won. And this isn't purple Virginia. This is not like a deep blue state. This is across the political spectrum. The reds don't want it. The blues don't want it. How much more of this? You better believe you're going to hear a lot more about this as we head into the midterms later this year.

[00:34:09]All right, meanwhile, we got some data points this morning. We'll go over these pretty quick. PCE Price Index, personal consumption expenditures, the Fed's preferred measure of inflation, big jump for the month of March, 3 and a half% up sharply from 2.8% in February. That is driven entirely by higher gasoline prices, driven entirely by the war in Iran. We saw something similar in CPI.

[00:34:35]Gasoline prices, by the way, still going up. Oil is over here doing whatever oil wants based on whatever is on Truth Social at any given time or or jaw boning or insider trading. But gasoline prices keep going up. So, this is going to get worse before it gets better. By the way, core PCE, which strips out fuel and food, uh 3.2%. Core PCE rose as well, up from 3.0. I can only assume that's being driven by tariffs because eventually the higher energy prices will bleed into core inflation because even those non-eny things are manufactured and transported using energy. So eventually they'll get more expensive too but that usually takes a few months to tr to transfer over. The fact that core inflation is rising I think this is being driven by tariffs. Uh 3.2 up from 3.0 guys inflation is moving in the wrong direction. Again, see also comments about possibly more hawkish moves from the Fed and the BOJ and others in the months ahead.

[00:35:37]Meanwhile, we got GDP estimates. US GDP grew at 2.0%. That's according to the first estimate of the first quarter of 2026. We'll get two more revisions to that over the next few weeks. That is up rather sharply from the 0.5% we saw last quarter, but below the 2.3% the market was hoping for. Uh let's see the US economy growth was driven by investment data centers exports probably a lot of oil consumer spending and government spending while imports which subtracts from GDP also increased compared to the fourth quarter of 2025. The acceleration in Q1 reflects upturns in government spending and exports as well as faster investment growth. So data centers government debt spending and probably selling down the SPR a little bit in the month of March. that will get worse in subsequent quarters. That looks like economic growth because it's an export, but really we're just burning through our savings of oil. These gains were partly offset by a slowdown in consumer spending while imports rose. Uh that slowdown in consumer spending, again, higher gasoline prices, you can expect to see more of that as when people pay more to fill up the tank, especially poor people, that money's got to come from somewhere. It comes from consumption elsewhere in the economy.

[00:36:56]All right, we got through it. There was a lot going on today, guys. Uh, look, I don't know what the market is going to do today. Last quarter after big tech earnings, we saw moves in the stocks.

[00:37:07]Some had big moves up and then bled out over the course of the next few trading days as investors slowly realized they didn't like the capex burn. Those problems have only gotten worse now. And so, we'll see. It's going to be interesting to see what happens as the opening bell rings over the next few hours. Um, and then we've got Apple earnings and we've got big uh big oil earnings later this week. There's still plenty more to come this week. So, I will see you guys tomorrow morning. But in the meantime, don't forget that like button and that subscribe button so you can come back and have your coffee with us again tomorrow morning. Thank you to my magnanimous melon heads on YouTube Patreon and buy me a coffee for supporting the channel. I got links down below should you feel so inclined. Hi, Mom. Hi, Dad. Love you guys. Everybody, till next time, live small and dream big.