I am sure that most of you are, like us, a tad worn out by so-called TACO turbulence. The term assigned to the U.S. president is fitting (Trump always chickens out), though we could probably spend an entire missive on related Mexican themed characterizations.  I happen to like GUAC (goes unhinged after criticism) or BURRITO (blusters until real risk is too overwhelming). In appreciation of the White House drama fatigue, I thought we would shift our attention this week to another variable behind the recent lift in market sentiment. I’m referring to the reminder that AI continues to deliver a growth narrative irrespective of concerns over an economic stall and global capital flow reversals.

While it is undeniable that Nvidia is still at the core of the production story, we have argued that the full utilization of the AI thesis from an investment perspective is in the delivery and integration. Artificial intelligence has officially crossed over from the land of lab coats and whitepapers to the land of boardrooms and earnings calls. In Q1 2025, over 35% of S&P 500 companies referenced AI in their earnings commentary, according to FactSet — and not just in passing. This is no longer the turf of speculative futurism; it’s a strategic imperative. But, just as every dotcom in 1999 had a website, every earnings call now has an AI paragraph. The problem? Not all AI talk is created equal. We’re starting to see a clear bifurcation: those genuinely using AI to create revenue or cut costs, and those trying to goose their share price with a buzzword-rich salad.

Over the past four weeks, we have seen generally upbeat results from the largest U.S. tech players. This week, Nvidia delivered a 69% year-on-year growth in revenues and a 73% rise in data centre revenue. There was a write-down due to unsold H20 chips because of China export restrictions, but overall, the street was happy. Salesforce also reported this week with earnings that beat expectations, and the company even raised its outlook for 2026 due to strong AI demand. Last month, Microsoft also came in ahead of street estimates on earnings and announced almost $17 billion in AI infrastructure, while Meta Platforms also beat street estimates and added to its AI spend.

Again, the expansion of AI across sectors is a journey from the chip to the servers and datacentres to the software applications to the satisfaction of the end user, whether business or consumer. Some examples would be Microsoft and how it is rolled out and expanded on its Copilot suite. Then there is ServiceNow, which develops workplace automation tools using AI. Meanwhile, Meta is not only building out data centres, but has also launched Meta AI, which is a virtual assistant that can be used on its apps and wearables. Alphabet (Google) is somewhat unique in that it develops its own proprietary AI hardware (their Tensor Processing Units) that is used in the delivery of its own AI infrastructure for cloud, applications and developer platforms.

Further downstream, we are also seeing examples of sectors increasing their integration of AI. In the financials space, firms are using tools to improve compliance and counter fraud. On the healthcare front, AI is being used to accelerate clinical trials, aid with imaging accuracy and speed, while firms like Moderna are using it in protein folding.  On Wednesday’s BNN Market Call show I talked about how companies in the retail segment are utilizing AI to better support merchants and cut costs. As for industrials, companies like GE and Siemens are incorporating AI platforms in order to improve predictive maintenance.

Then again, there are sectors and companies which have either treated 'AI' like a seasoning — sprinkle it in, and Wall Street perks up – or can’t seem to find effective ways of implementing AI.  This would include the construction industry, where much of the end work is still done by hand, as well as hospitality. Even those companies that have may have been first out of the gate in terms of incorporating AI, are finding that maintaining innovation and momentum can be difficult.

Where companies can’t build out their AI infrastructure organically, they are out there shopping.  Salesforce recently bought Informatica and ServiceNow acquired Moveworks. Alphabet (Google) did a massive gulp when it took on board Wiz and we have seen smaller, yet still important merger and acquisition deals further down the food chain.

It’s important to note that while the U.S. has seen the overwhelming lion’s share of merger and acquisition activity, the nascent shift away from American capital markets could put a dent in that appetite, potentially bringing more benefit to other regions. Competition is also gaining momentum and companies without a sufficiently large moat could run into issues.  We have seen that with respect to Adobe.

There are two things that I believe to be true in all this. First, the global adoption and integration of AI still has a way to go. Now that baseball season is upon us, if the first few innings of the AI game were about hype and excitement in the stands, we are now entering the middle innings and they are all about execution. We have a few more beers and bags of peanuts before seventh inning stretch, at which point the focus shifts to sustainability of demand and accountability, including things like governance and climate considerations. For investors, this means discernment in sifting through the players out there. AI is absolutely real — but not equally real across all companies. They may all talk about how operations are using more “bits”, but not all of them will be turning them into EBITDA.

On behalf of the Pyle Wealth Advisory team, have a wonderful weekend.

Andrew Pyle