All the good mood you see in the Nasdaq and S&P. But behind the optimism, new data this week brought unsettling signs.
Profit is no longer enough.
To maintain this pace, they are spending more, burning cash and taking on debt — all with a valuation that already implies that nothing can go wrong!
- The week that raised doubts about the market's direction
Apple, Amazon, Meta, Microsoft, and Alphabet released their results.
The Nasdaq recorded its 7th consecutive monthly gain—its longest streak since 2018.
But the rally began to coexist with unease: some earnings reports showed that the cost of the euphoria is becoming more visible.
- Meta lost R$1 trillion in 1 day
The numbers were good: revenue growth, profit above expectations, solid guidance. But the tone of the conference call sealed its fate.
Zuckerberg made it clear that investments in AI and data centers will continue to increase—even without a visible return in the short term.
The market reacted with one of the biggest drops in market value in history: -US$215 billion in one day.
- Profits remain strong, but what's left over is dwindling
Big Tech companies continue to deliver robust results on paper. But free cash flow—which is what really matters for the continuity of the cycle—has been falling for over a year.
The problem isn't generating results.
It's the growing need to reinvest almost everything to sustain the AI narrative.
- Valuations Reflect Perfection — But the Scenario Isn't Perfect
Nvidia is already worth US$5 trillion. Apple and Microsoft are above US$4 trillion. These three companies alone are worth more than most emerging market stock exchanges combined.
The price reflects an expectation of continuous growth, efficiency gains with AI, and total market dominance — without setbacks.
But some balance sheets have begun to show friction: more spending, less free cash flow, and the risk of compression ahead.
- The Magnificent Seven Concentrate Risk Like Never Before
Apple, Microsoft, Amazon, Meta, Alphabet, Nvidia, and Tesla already account for 38% of the S&P 500 — the highest level in history.
This means that any adjustment in these companies reverberates across all ETFs, passive funds, and the perception of global risk.
And it's not just about the weight of these companies, but the concentration on a single theme — AI — at a time of still high interest rates and uneven growth.
- The world's richest companies are taking on debt
For years, Big Tech was synonymous with a clean balance sheet: lots of cash, almost no debt. But that's changing.
Meta and Microsoft already have more debt than cash on hand.
They are taking on debt to finance share buybacks and expand AI capabilities—the kind of decision that can work in a growth cycle... or cost dearly if the cycle reverses.
- Meta raised US$30 billion. Oracle did the same.
Zuckerberg called it "general corporate purposes." But the market knows: it's money for AI, cloud, and data centers. Oracle did the same thing weeks before. Those who don't fund now may fall behind.
The risk? The numbers don't add up, the return doesn't materialize, or the cost of money rises again mid-way through.
- These financial reports don't change the thesis — but they make it more expensive and sensitive.
Big Tech companies remain the main driver of the market. But the financial reports made it clear that the bar has been raised: they need to continue delivering accelerated growth with robust margins, while burning cash and increasing debt.
The AI thesis will continue to be the main driver of the market for a long time — but it requires more investment, more patience, and less room for error.
When the market starts penalizing even those who deliver good numbers, the warning isn't about the result. It's about the (enormous) expectation.