Last night, Nvidia reported earnings. The AI bellwether doubled its net income from $22 billion to $43 billion in the fourth quarter of 2025.
Good news, right? Nope. The stock dropped like a stone at the open today, down 7%.
For AI-linked companies — Nvidia foremost among them — investor expectations continue to rise along with their valuations. At this point, even billions in profit are not enough.
Like the fiber optic spending plans that dominated the 1990s at the height of the dotcom bubble, AI spending is squeezing the cash flows for the S&P 500’s biggest companies:
Soaring AI spending is hitting Mag 7 balance sheets and will risk capital gains for individual investors across the indexes going forward. (Source: Crescat Capital)
The market has a logic all its own. Despite record profits, the Mag as a group is down 12% from its October 28, 2025, high.
~ Addison
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