Tech's hyperscalers face Wall Street for first time since U.S. Iran war sent oil prices soaring

The last time tech's hyperscalers addressed Wall Street, three months ago, they announced plans to collectively spend well over half a trillion dollars this year to build out their artificial intelligence infrastructure.

That was before the U.S. invaded Iran, causing oil prices to spike, and leading to a dramatic slowdown in production of helium, which is crucial to semiconductor manufacturing. Meanwhile, the global memory crisis has worsened, forcing tech giants to pay up for the capacity needed to satisfy their data center ambitions.

But pay for it they will. With Anthropic's Claude models and coding tools growing at historic rates and services like OpenAI's ChatGPT and Google's Gemini continuing to gain popularity at home and in the office, the world's most valuable tech companies have shown no signs of pulling back on the buildouts they say are needed to meet seemingly insatiable demand for compute resources.

Now they have to level with investors on what it all means for spending, profitability and cash flow. And they'll be doing so within minutes of each other.

Alphabet, Amazon, Meta and Microsoft are all scheduled to report quarterly results after the close of trading on Wednesday, just over two months after the U.S. and Israel launched joint attacks on Iran. Despite a roughly 50% jump in oil prices since the start of the war and an almost 80% increase this year, the group has held up well on Wall Street, with only Microsoft down for the year.

Ted Mortonson, tech strategist at Baird, described the market as being in a "complacency phase," with investors betting that President Donald Trump will back down in the Middle East and that disruptions will be temporary. He called it the "TACO trade thought process," referring to the shorthand for Trump Always Chickens Out.

But Mortonson is personally very concerned, in part because investors are showing none of the "fear panic and capitulation" he saw during the dot-com bust in 2000.

"This is probably one of the most mispriced cycles I've seen in my career," Mortonson said.

Analysts aren't projecting any massive swings in capex forecasts for the year. For Alphabet, Amazon and Meta, average estimates, according to FactSet, are all within range of guidance provided in January. Microsoft didn't issue capex guidance, but analysts on average expect growth of 66% in the fiscal year ending June to $107.5 billion, the lowest among the hyperscalers.

In Amazon CEO Andy Jassy's annual letter to shareholders earlier this month, he defended his company's plans to spend $200 billion this year, a more than 50% increase from 2025, writing that, "We're not going to be conservative in how we play this." He made no reference to the war in Iran or higher energy prices. And Brad Smith, Microsoft's president, told CNBC's Power Lunch in March that, "When you have more demand than supply, you need to grow supply."

Amazon Web Services has no plans to raise prices despite confronting increased costs, according to a person familiar with the matter who asked not to be named while discussing internal strategy.

Analysts at KeyBanc wrote last week in a preview to Microsoft earnings that two of the things they're focused on are the "impacts from the Middle East" and "impacts from memory pricing on the cloud." The analysts, who recommend buying the stock, noted that their "checks and survey results entering the print are mostly positive."

In an Amazon preview, KeyBanc analysts said they expect revenue to meet estimates, "with some downside risk to operating income due to the Middle East and gas." They have the equivalent of a buy rating on that stock, too.

Citizens analysts wrote in a report on Meta last week that it expects the social media company to increase capex guidance for the year, citing its recent billion-dollar data center deals. Meta attributed plans to cut 10% of its workforce, roughly 8,000 employees, to its costly AI initiatives, telling staff in a memo on Thursday that the layoffs represent "part of our continued effort to run the company more efficiently and to allow us to offset the other investments we're making."

Meanwhile, Microsoft told employees on Thursday that it would offer voluntary buyouts. Around 7% of its U.S. workforce, or 8,750 employees, are eligible, said a person familiar with the plan.

'Great deal of uncertainty'

One key question investors are asking is whether the rise in oil prices, along with the memory shortage, will factor into forecasts, or if the companies have enough levers they can pull to mitigate the effects.

The soaring cost of oil is boosting the price of diesel, which has jumped about 42% since the start of the war in Iran, according to data from the U.S. Energy Information Administration. Data center operators pay hefty fees for transportation and manufacturing, which are impacted by higher fuel prices.

AI chipmaker Cerebras said in its IPO prospectus earlier this month that data center power charges take up "a significant portion" of the company's operating expenses.

In March, Iranian attacks damaged a liquified natural gas plant in Qatar that makes helium, halting production. The U.S. Geological Survey estimates that before the war Qatar produced more than one-third of the world's helium supply. Sulfur, another chemical that companies count on for chip production, has also become more expensive because of concerns about shipments through the Strait of Hormuz.

Tanker traffic through the strait remains very low during a fragile ceasefire agreement between the U.S. and Iran. Baker Hughes, one of the most influential oilfield drillers in the world with extensive business in the Middle East, said last week that it's working under the assumption that the strait may not fully reopen for months.

"There's still a great deal of uncertainty regarding, ultimately, the duration and depth of the conflict," CFO Ahmed Moghal told investors on the company's first-quarter earnings call.

If global prices for liquified natural gas continue rising as they have since the attack in Qatar, electricity rates to power data centers are also likely to shoot higher, said Benjamin Lee, a professor of electrical engineering and computer science at the University of Pennsylvania.

However, Robert Thummel, portfolio manager at Tortoise Capital, which runs energy-related funds, said the U.S. could be insulated from global energy market instability because it's the world's biggest supplier of LNG.

"We have so much natural gas in the U.S. that not only are we self-sufficient, but we have so much that we export a significant amount, and probably should be exporting more," Thummel said. He sees it as a competitive advantage for domestic tech companies.

"Microsoft and Meta and Google can all build these data centers, sprinkle them throughout the U.S., and yes, they're expensive, but the electricity, which is a big component of the cost, is nowhere close to what it's going to be internationally," Thummel said.

Still, constructing the gigawatt-scale data centers those companies have promised requires massive new energy facilities. Lee said there are all sorts of hurdles standing in the way of that happening, including the regulatory and approval process, hooking up power stations to transmission lines, "and then figuring out who pays what share of those costs."

Oil price surge, memory crunch

Deepak Mathivanan, an analyst at Cantor Fitzgerald, said investors want to known whether the data center and computing investments of tech giants like Meta are "tracking according to the plan." For now, he said it's too early to tell whether the Iran war will impact AI buildouts, and the lack of historical precedent makes it hard to predict the second and third-order effects, he said.

"There is a pretty healthy demand to justify some of the buildout," Mathivanan said, citing examples like Meta's advertising boost from AI and the popularity of new models and services. "But how these uncertainties manifest in terms of plans versus actual implementation is just very hard to tell."

Then there's the memory crunch, which began before the war and has only intensified. The AI-driven shortage has lifted shares of memory maker Micron more than 550% in the past year.

Micron CEO Sanjay Mehrotra said in March that the company sees demand exceeding supply throughout 2026 when it comes to memory for standard computer servers, Nvidia chips and solid-state drives for data centers.

Device makers are responding. A Microsoft spokesperson said memory and component costs pushed the company to raise prices on Surface PCs by hundreds of dollars.

Technology industry researcher IDC is forecasting that dynamic random access memory, or DRAM, will cost $9.71 per gigabyte in 2026, compared with $3.76 in 2025. Marta Norton, chief investment strategist at Empower Investments, said the scale of cost increases for memory is "startling," with implications for cloud providers and Nvidia.

Spot prices for Nvidia H200 GPUs reached $3.82 per hour this month, up from $2.27 in January, according to data from Ornn, a startup that compiles market data and is building an exchange for computing power.

Gil Luria, a D.A. Davidson analyst who covers Amazon, Google, Microsoft and Oracle, said the "hyperscalers are absorbing those increased costs." He said one concern is that "these bottlenecks are going to make everything more expensive and put pressure on everybody along the way."

Baird analyst Will Power cited shortages and mounting memory costs in a note on April 15, as he lifted his estimate on Microsoft's fiscal 2027 capex to $180 billion from $161.6 billion. He bumped up his projection for the 2026 calendar year by about 4% to $157.5 billion.

For Acre Security, which sells physical and digital security products to data center operators and critical infrastructure providers, rising oil prices haven't had an effect yet, but they could, said CEO Kumar Sokka.

Well before the war began, President Trump's tough tariffs made it challenging for Acre to source components for products like cameras and intrusion detection systems, Sokka said, adding that the company's contract manufacturers have shifted production to places like Portugal, the Philippines, Mexico and parts of the U.S.

The speed of data center construction and unforeseen speed bumps like tariffs are forcing companies to learn how to quickly react to sudden changes, Sokka said.

"You've got to be smart and watch the funnel and the pipeline and your supply chain very closely to ensure that you're not at all hurting your business," he said.

One thing that's clear heading into this week's earnings reports is that equity investors remain bullish on the AI trade. Nvidia climbed to a record on Monday and has surpassed a $5 trillion valuation. And Intel, which is finally elbowing its way into the AI chip market, had its best day on Wall Street since 1987 on Friday after stronger-than-expected earnings.

The Nasdaq is up 15% in April, and is headed for its best month since April 2020.

"There's a high level of confidence that either these shocks will not last a long time, or that they will get passed through quite perfectly to keep margins intact," said Skanda Amarnath, executive director of think tank Employ America.

Dan Taylor, chief investment officer at Man Numeric, had an even more succinct explanation: "It pays more to be bullish than to be bearish."

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