Companies

Despite Cloud and Search revenue blowing past expectations, shares of GOOG traded down about 2% in after-hours trading. The disconnect appears driven by optics around a much larger-than-expected CY26 capex ramp, a sharp step-up in depreciation, and some perceived variability in near-term cloud growth tied to supply. Google and Meta are the two best examples of companies translating AI tech into better-than-expected revenue growth. Lastly, that huge step up in capex spend this year underscores we're still early in AI.

Shares of AAPL are not getting the love they deserve, up only 1% on impressive December results and guidance. I would have expected them to be up 5% or more after the report. I believe the muted stock reaction is largely because investors want more clarity on when and how AI will impact the business. History suggests Cook will deliver the AI goods in the form of the first must have AI devices, likely starting mid to late this year. In the meantime, investors can sleep well at night knowing Apple’s customers remain loyal.

Meta’s December quarter results and guide provided the latest evidence that AI is materially accelerating the business at scale, boosting shares by 6% in after hours following a 5% move higher over the past week. The outlook for revenue growth was impressive, borderline hard to believe, calling for 33% growth at the high end of the range, an acceleration from 24% in the just reported December quarter. If they deliver on projections, revenue growth would be the highest since September of 2021, off a sales base that has about doubled over the past five years, pushing the law of large numbers to the side. Additionally, AI is improving engagement across the Family of Apps, up 7% y/y to 3.6B daily users. In September of 2024, DAU growth was 4.8%, representing faster growth off a bigger base. Lastly, Zuckerberg hinted that more products will come in the months ahead from Superintelligence Lab, which we believe will include a new foundational model.

Tesla’s quarter was met with shares up 2% in after hours, follwing shares being down 0.5% over the past week, suggesting investors were modestly impressed by the company’s progress in autonomy. I believe the stock action understates the progress the company is making in physical AI, and expect a breakthrough in FSD in the next one to two years, which should have a domino effect of accelerating progress in Robotaxi. My evidence of this progress includes recent personal observations of FSD, the company now reporting FSD subscriptions, and the company discontinuing Model S and X, about 2% of sales, in favor of using production lines to ramp Cybercab.

Tesla will report December earnings on Wednesday, January 28th. Since reporting deliveries on January 2nd, shares of TSLA are up 1%, in line with the Nasdaq. The three most important topics on the call are the timing of expanding safety-driver-free Robotaxi service to new cities, high-level commentary on deliveries in 2026, the first full year without the tax credit, and margin expectations this year, including the impact of the lower-priced Model 3 and Model Y. While FSD, Optimus, and timing of Cybercab ramp are top of mind, there is likely little new Elon will say to change how investors are gauging the success of those segments. In the end, I expect shares to move higher throughout the year as investors gain confidence that Tesla remains best positioned to capitalize on physical AI.

Over the past three months, shares of GOOG are up 31% vs the Nasdaq up 4%, as Google’s technical chops in AI have been validated. Strengthening AI products have translated into higher Street expectations for Search growth in December, increasing from 12% two months ago to 14%. I believe the segment will end the quarter up 15% based on our survey of sponsored ads within AI Overviews and AI Mode. That upside should flow into CY26, and provide further upside.

Nvidia gave three incremental updates at CES that pointed to upside this year. The first was Jensen’s comments in the keynote twice describing demand as “skyrocketing.” The second was CFO Colette Kress saying at the JPMorgan fireside that their previous target calling for a $500B data center revenue outlook through 2026 has “definitely gotten larger.” The third was Jensen’s comment that demand for the relaunch of the H20 in China was “quite high.” Shares of NVDA shrugged off the good news, trading down 4% in the three days following the updates, compared to the Nasdaq which was flat, underscoring investor concern that it's a function of time before growth stalls. I believe growth will be higher for longer, driven near term by the hyperscalers and long term by Physical AI.

Tesla delivered 418k vehicles versus Street expectations of 420k and above the whisper number of 415k. Overall, deliveries were down 16% year over year in December, compared with up 7% in September. Cutting through the noise around the timing of the tax credit expiration, I believe deliveries would have been down ~5% in both September and December signaling stabilization that should allow investors to remain focused on autonomy. Additionally, I believe these results indicate the first U.S. EV market share gains in a couple of years.

At the surface, our testing of Apps in ChatGPT showed how little value these integrations provide today. That said, our testing largely misses the point. What’s most important is that today some of the biggest tech companies, including Google, Microsoft, Apple, Salesforce and Adobe, are enabling ChatGPT to be the front end of some of their app experiences. That’s an impressive endorsement, especially considering many of them have their own LLMs that compete with GPT. This paves the way for OpenAI to make good on its prediction that it will become the platform that runs vertical AI applications.

We expect December deliveries, which will likely be reported on Friday, January 2, to come in at 415k versus the Street at 449k. This would imply deliveries are down 16% y/y, compared with the Street’s expectation of a 10% decline. The difference reflects our model’s adjustment for the expiration of the tax credit in September, which assumes year-over-year growth in September and December will be consistent at down 5%. Ultimately, investors are likely to look past any December-quarter delivery miss, as the results should suggest the auto business is beginning to stabilize.

The WSJ reported that OpenAI is looking to raise $100B at a $830B post-money valuation by the end of March 2026. Despite the hype, there is a sound case that OpenAI is attractively valued at the new valuation and we believe it could realistically double or triple in value over the next few years.

A lot happened in 2025 when it comes to robotaxis, which makes it fitting to mark where things stand today between Waymo and Tesla. This year, Waymo moved beyond the pilot phase and entered the scaling phase, with a fully driverless service operating in five US cities and a fleet of around 2.5k vehicles. Tesla’s Robotaxi is running a fleet of around 50 vehicles, largely supervised in Austin and the Bay Area. While Waymo has the lead, the market remains nascent, likely exiting 2026 with about 1% of rides in the US, which means Tesla has plenty of time to catch up. For 2026, it will all come down to how the no safety driver Austin test goes. If that goes well, look out Waymo.