Big Tech Earnings Put the Rally to the Test 10/21/26

Meta Platforms

Across the shows: 22 speakers in other episodes, 20 bullish and 6 bearish calls, past 30 days

• Brent Thill · JefferiesBullish

  Meta's Muse AI assistant will drive a meaningful revenue tailwind over the next year through ads, subscriptions and agents.

  Thill's team is bullish based on their own usage of Muse, which he calls a killer app. He sees three monetization routes: Muse-driven engagement brings more advertisers because they believe AI is working; heavy token use will force users to re-up through one-time purchases or subscriptions; and Muse agents across devices (phones, wearables, home) will spread into subscriptions and advertising. He says it is early, but the tailwind over the next year is what they are bullish on. He also notes Meta did not highlight Muse's business impact in the release, so the market needs more detail on the call.

  “And again, from our usage, we are very bullish on what we're seeing from the tailwind from what's going to happen with Muse over the next year.”at 11:38

• Tony Wang · T. Rowe PriceUncertain

  Muse is a massive opportunity, but Meta must show how new businesses and transaction revenue will pay off.

  Wang calls Muse usage very impressive and the first way for consumers to have agentic AI on their devices. He sees it as a massive opportunity. But he says the market needs to know how it will pay off in new businesses and markets. Usage and attention are the key, and the installed base is a big asset, but Meta must now take a piece of transactions it could not capture before. He says the company must keep current businesses accelerating, including operating profit, and convince investors that AI commerce works. He describes this as a 'show me the money' phase given costs like memory inflation, data center construction and financing.

  “And so to me, I think it's a massive opportunity, but at the same time, I think we need to know like how this is gonna pay off in the new businesses and the new markets that Mark can create.”at 34:12

International Business Machines

Across the shows: 2 speakers in other episodes, 2 bullish and 0 bearish calls, past 30 days

• Brent Thill · JefferiesUncertain

  IBM faces a continued wall of worry near term over AI positioning, mainframe deal durability and consulting exposure.

  Thill says the first half was a big mess, and cleaning up delayed deals is not enough. IBM must show it is addressing AI in a bigger way, because its 8% software growth lags other software categories. Two-thirds of the mainframe deal upside is the key driver, but clients care more about the next computing trend. Investors worry whether mainframe deals stick or migrate to new AI systems, and whether IBM is positioned as consulting is pressured by AI. He calls IBM consistent and stable, but not a blow-out, and the beat numbers are good but do not remove the worry.

  “So I think there's a continued wall of worry for IBM short term tactically.”at 17:11

• Brent Thill · JefferiesBearish

  IBM's quantum hype is premature; quantum is not a revenue driver until about 2029.

  Thill says IBM has publicly stated quantum is not a revenue driver, and quantum is not an event until 2029. He does not see why IBM gets so excited about it right now, given that enterprises are focused on AI, not quantum. He thinks IBM and Google have strong quantum positions, but the technology is not ready for prime time. He suspects the emphasis may be a way to deflect from AI weakness, and says IBM should fix its AI position before the quantum wave arrives, which he puts two or three years out. The stance is bearish on the quantum narrative supporting the stock.

  “I wish he wouldn't talk about this honestly because quantum's not a [revenue] event till 2029. Right. They have publicly said it's not a revenue driver.”at 17:56

AgenTek

• Tony Wang · T. Rowe PriceUncertain

  AgenTek must let its AI agents take a share of transactions to monetize usage.

  He says AgenTek needs to be able to take a piece of the transaction on a go-forward basis, in a way it couldn't before. He argues agents can do things people could never do because their time is constrained. Delivering that capability is what he is looking for from the company. The segment is partial, so the case is thin and the monetization outcome is not yet proven.

  “they need to be able to take a piece of the transaction, you know, on a go forward in in a way that they weren't able to to do before.”at 37:17

AI infrastructure & data centers

• Brent Thill · Jefferies

  Hyperscaler AI capex will rise materially into 2027, and hyperscalers' cash-flow strain keeps their stocks lagging.

  Thill says his firm's AI analysis shows capex will only go materially higher into 2027. SpaceX's capex guidance roughly doubled Street expectations for the quarter, and he expects Microsoft, Meta, Amazon and others to be constrained and raise more debt and equity to fund it. The open question is whether hyperscalers' cash flow goes to zero before the ROI arrives. That has weighed on their stocks, which have lagged the companies receiving their AI spending. He expects this to flip in a couple of years, when the spenders become the stocks to own because they supply the AI systems. Meta's nonvoting stock raise is smart given the need for capital.

  “Everything we see in all the data we look at in our AI analysis shows that these capital expenditures are only going to go materially higher as we go into '27.”at 9:32

• Tony Wang · T. Rowe Price

  AI compute demand is strong, but current pricing may not hold once new capacity arrives; economics must be proven.

  Wang lays out the bull and bear cases. Bulls see tremendous demand. Bears say the economics have not been proven, because demand is strong but the market may be capitalizing pricing that is too strong, especially once new capacity comes online. He argues the answer depends on end demand and on whether new products justify it. He says that, until the existing businesses of frontier labs and capex spenders like Meta and Google show strong revenue acceleration and the market believes in the new markets they open, the evidence is hard to call. Capital markets are tightening, so the next few quarters are critical.

  “I think the bears would say that, we have to see how the economics prove out. Because right now, demand dynamics are strong, but you're also capitalizing perhaps pricing that's too strong, especially once new capacity hits the market.”at 35:08

• David Zervos · Jefferies

  Slower hyperscaler debt issuance has reduced duration supply and helped pull Treasury yields lower.

  He says hyperscaler issuance has slowed, and the market noticed. Debt issuance by these companies had been sucking duration out of the market, and that supply pressure is now easing. He ties this to the recent 20-basis-point drop in ten-year yields. He also links the drop to a shift in debate toward the long-run disinflationary effect of superintelligence. He attributes much of the recent move lower in yields to less crowding out from issuance.

  “that has been sucked out of the market by all of that debt issuance and the optimism that these companies bring by putting their balance sheets on the line to make these bets on building compute.”at 43:15

• David Zervos · Jefferies

  Big AI companies levering their balance sheets to build compute is a great story with no systemic risk.

  He argues that the companies building AI compute are at the forefront of technology, are making large amounts of money, and are willing to put their balance sheets and senior secured debt on the line to build and compete on compute. He cites the Treasury secretary's view that there is no systemic risk in this build-out. He expects AI to deliver services such as legal, travel, medical and financial services to phones at 10 to 30 times better and ultimately cheaper. Debt-funded buildout is therefore a positive story in his view.

  “These are companies that are on the forefront of technology, making tons of money that are willing to put their balance sheets, their senior secured part of their capital structure, their debt on the line.”at 44:50

US stock market outlook

• Julian Emanuel · Evercore ISI

  Easing long-term yields set up significantly higher S&P prices in 2027, with the market flattish this year.

  Emanuel says rates matter: hyperscaler capex is not price-insensitive, and financing strain at secondary companies plus credit widening show the capex boom has a finite limit. Yet the recent drop in longer-term yields is part of what he thinks will lead to significantly higher prices in 2027. The economy is still good and credit is still plentiful, which he calls medium- to longer-term bullish. He keeps a flattish S&P call for this year because liquidity is thin while investors wait for midterm outcomes and geopolitical risk plays out.

  “Actually, the fact is, if you look at the market's reaction the last several weeks, with longer term yields coming in, you can argue that this is part of what we think is ultimately going to lead to significantly higher prices in 2027.”at 23:17

• David Zervos · Jefferies

  Stocks have proven resilient despite the energy shock and rate reset, and are sitting at record highs.

  Despite the energy shock and the swing in the rate path from cuts to hikes, which he calls two very negative headwinds for markets, everything has been incredibly resilient. The market is sitting at a record high. He says there have been about 50 new highs this year and roughly 60 since Trump's first term.

  “the most important takeaway from that, from those two very negative headwinds traditionally for markets is that everything's been incredibly resilient.”at 40:51

Oil & fuels

• Julian Emanuel · Evercore ISI

  If WTI stays above $100 into 2027, an economic slowdown becomes almost unavoidable.

  Emanuel says the economy has been resilient so far, even though headlines about diesel prices are hitting household budgets. He does not take spending resilience for granted. If WTI is north of $100 in 2027, he says it is almost impossible not to conceive of some form of economic slowdown. He ties this to a wider case of political and headline-driven volatility, which makes the market sensitive day to day.

  “If we are talking about WTI north of $100 in 2027, it's almost impossible not to conceive of some form of economic slowdown based on that.”at 25:46

• David Zervos · Jefferies

  Energy shock drives the inflation and rate story; oil could fall back toward $60 once conflict ends.

  He says WTI is up almost 80% since February 27 and that this shock reset the Fed's expected path from 50 basis points of cuts to 50 basis points of hikes. He argues the whole inflation and yield story traces back to energy. Back-month oil prices hitting new highs makes him think the energy risk is more persistent. If the conflict ends, he expects energy to pull back and oil to return to around $60, the level seen early in the year, though he concedes this may be too optimistic.

  “we're talking about, you know, 60 oil again, which is where we were at the early part of the year, and then all this discussion goes away.”at 41:38

Credit markets

• Julian Emanuel · Evercore ISI

  Credit is the arbiter of the AI capex boom; a breach of March stress levels would prompt reassessment.

  Emanuel says credit conditions are the arbiter that eventually stops rising yields and rising stock prices, as in Y2K and Japan in the late 1980s. Credit default swap indices have made lower highs through the bull market. He sets the line in the sand at the stress levels reached at the March conflict peak. Capex has grown larger and risks have magnified, so breaching those levels would be the point to reevaluate his bullish case.

  “If we were to take out sort of the levels of stress that we reached in the peak of the conflict in March, that... to us would be the level where we would probably want to start reevaluating.”at 26:44

US Treasuries & yields

• David Zervos · Jefferies

  Treasury market may have peaked; yields could fall much lower once the energy shock fades.

  Yields sat about 20 basis points below their early-October highs even after hotter-than-wanted core CPI and strong retail sales and industrial production, which he reads as evidence of positioning rather than fundamentals. He thinks the Treasury market may have put in its highs and that debate will centre on where the energy-driven move ends over the next few months. He hopes that once the conflicts end, the conversation can move to much lower yields. He traces the rise in ten-year yields closely to energy prices. The view is hedged with 'maybe' and 'hopefully'.

  “So I think we're getting to a point where maybe the treasury market has put in its highs, and we're gonna find ourselves debating for the next few months where this energy move ends.”at 39:39

US inflation

• David Zervos · Jefferies

  Headline inflation is an energy story; underlying core trend measures are in the low twos and falling.

  He says the hot core CPI print, up to 2.6% from 2.4%, is noise against a broader trend. Trend-mean CPI measures and most core gauges are in the low twos, with core PCE the exception at around 3%. These measures have been trending down for well over a year or two. He argues the headline surge comes from the energy shock, not from underlying inflation pressure.

  “the trend mean CPIs, all these core numbers are basically, with the exception of core PC[E], which still sits at around three, are all in the low twos.”at 42:03