| DAILY ISSUE The Mag 7’s AI Spending Spree Spells Trouble – Look Here Instead VIEW IN BROWSER The Magnificent Seven have been the “kings of the market” for the past few years, leading to some of the biggest gains on Wall Street. But now this septet is spending like kings, and that’s going to lead to different results. The Mag 7 companies are expected to spend about $330 billion in capital expenditure (CapEx) on artificial intelligence this year, according to Reuters. And after analyzing this week’s earnings releases from Meta Platforms Inc. (META), Microsoft Corp. (MSFT), Apple Inc. (AAPL), and Amazon.com Inc. ( AMZN), it looks like that number will only grow. So, in today’s Smart Money, let’s discuss how these four tech giants have become bolder with their AI spending by looking at their recent earnings reports… And why this is a crucial reason to remove these “kings” from your portfolio. Instead, I’ll show you why it’s worth looking at more “humble” companies – those that may quietly become the new AI royalty… And where to find them. | Recommended Link | | | | This one stock has been responsible for gains of 85% in 14 days, 176% in 5 weeks, 41% in two weeks, 120% in 3 months, 138% in 8 days, 186% in 8 days, 222% in 8 days, and many more… Now, millionaire trader Jeff Clark is revealing his strategy for trading this stock PLUS the full name and ticker symbol for FREE. Simply click here right now to watch. |  | | Meta and Microsoft: Magnificent Growth, Magnificent Spending Meta reported a second-quarter earnings beat on Wednesday, sending shares soaring by 12% the following day to a record high of $784.75. The Facebook and Instagram parent reported revenue of $47.52 billion and earnings per share of $7.14, surpassing analysts’ expectations. Its second-quarter sales jumped 22% year-over-year – the same growth rate as a year ago. While that sounds great, here’s where things get expensive. The company boosted the lower end of its CapEx forecast to between $66 billion and $72 billion, up from the previous range starting at $64 billion. This makes sense as the tech giant went through some restructuring in their AI division in June, investing $14.3 billion into Scale AI and creating the new Meta Superintelligence Labs. Meta’s total expenses for 2025 are projected to be between $114 billion and $118 billion, which also raises the lower end of its previous estimate by $1 billion. During the earnings call, when asked about the tech giant’s growing CapEx, Chief Financial Officer Susan Li said the company is “exploring ways to work with financial partners to co-develop data centers.” However, it is very possible that Meta ends up biting off more than it can chew. Not to be outdone, shares of Microsoft popped 9% after hours Wednesday as the company reported better-than-expected fiscal fourth-quarter results. Earnings per share hit $3.65 versus Wall Street’s $3.37 expectations, while revenue reached $76.44 billion. Again, while this might look compelling to investors, Microsoft is following the same trend of inflated spending. Microsoft CFO Amy Hood announced that the company expects over $30 billion in capital spending for the first quarter of fiscal year 2025 – resulting in an annual growth of over 50%. This surpasses analysts’ expectations of $24.23 billion. It’s also facing data center infrastructure shortages as the tech company prepares for additional AI models to be run. In January, Hood said they’d be in “better supply-demand shape” by June, but she’s now moved that time to December. If this pace of spending continues, Microsoft is likely to hit over $120 billion for the full fiscal year, a 36% jump. Apple and Amazon: Ambitious Plans, Anxious Investors Apple delivered solid third-quarter results Thursday with revenue jumping 10% – its best growth since December 2021. Earnings per share came in at $1.57 and revenue at $94.04 billion, both beating analysts’ expectations. iPhone sales – still Apple’s bread and butter – increased 13% year over year. But the company faces tariff costs – adding up to $800 billion in the June quarter. Although tariff costs came in lower than Apple’s May prediction, CEO Tim Cook warned investors that it could incur about $1.1 billion in tariff costs for the September quarter. So, only time will tell if Apple’s ambitions pay off… or if it is starting to feel the dooming weight of its kingly crown. My bet is on the latter. Like Apple, Amazon also beat third-quarter earnings estimates on Thursday with $1.68 per share and $167.7 billion in revenue. But the market had a different reaction as shares tumbled over 7% after hours. And it could be because Amazon’s AI spending is getting noticeably expensive. The company’s free cash flow nosedived to $18.2 billion from $53.9 billion last year as Amazon ramped up capital spending on AI infrastructure. It spent $32.2 billion on property and equipment this quarter – close to double last year’s $17.6 billion. Most of that went toward data centers and AI capabilities. Amazon Web Services, their cloud crown jewel, grew 18% to $30.87 billion. Although solid, it is still trailing the growth at Microsoft Azure (39%) and Google Cloud (32%). Competition is heating up, and Amazon is hemorrhaging cash to stay relevant. What’s more, Amazon has pledged to spend up to $100 billion this year, mostly on AI-related investments. So, it’s safe to say that the Mag 7’s $300 billion expected spending will only get bigger. While these kings are busy proving to themselves that they’re invincible, they’re burning through capital at a concerning rate. Because they are selling for spectacularly high valuations, they may struggle to “grow into” those valuations. Here’s what companies to look at instead… The Next AI Winners When expensive tech stocks are flying high, many indirect or non-tech stocks are usually flying low. Often, you will find these stocks in out-of-favor industries or foreign markets, like those that excelled during the early 2000s. Most investors simply ignore these stocks, no matter how outstanding their potential might be. That’s a bad idea. So, I think you’re better off ignoring any overhyped tech stock right now. Instead, I’d put that money into lesser known, highly misunderstood stocks. This is especially true with AI only accelerating, moving toward artificial general intelligence (AGI). AGI is a great, revolutionary advancement – it will change everything. And it’s coming sooner than people expect. In fact, some experts suggest we could see an AGI breakthrough by the end of this year. But their pursuit of AGI could break the banks of these Mag 7 companies. So, to prepare for AGI, I’ve released a new special report – called Sell This, Buy That: The Race to AGI – in my Fry’s Investment Report service. In this report, I detail three plays I believe will soar in the age of AGI. Instead of joining the crowd and investing in companies everyone’s already crowning as winners, I urge you to look at the humble players quietly building real value. To learn more about Fry’s Investment Report – and how to access this special report – simply click here. Regards, | 
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