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Introduction

The alternative rock band R.E.M. went from Athens, Georgia, to the top of the world in 1991 with the hit song “Losing My Religion.” The provocative video won a Grammy and several MTV music video awards. The song and sentiment are still relevant today as demonstrated by the over 1 billion views on YouTube.

The song is not about religion. R.E.M.’s frontman Michael Stipe explained that “losing my religion” was a southern phrase describing the feeling of being at the end of one’s rope or losing faith. The message is perfect for discussing markets in 2025. (Honorable mentions in the R.E.M. catalog include “It’s the End of the World as We Know It” and “Everybody Hurts.”)

Market Uncertainty

Investors often point to uncertainty as a reason for market declines. We think that’s lazy because uncertainty is always a part of investing. We admit the level of fog today is thicker than the normal haze. According to the Global Economic Uncertainty Index, the uncertainty is higher today than during COVID-19. The March 2020 uncertainty peak was the bottom of the stock market decline and the start of a +50% rally. Uncertainty can be a good time to buy. We are not suggesting this is peak uncertainty or that a 50% rally is in store. We are simply looking deeper at our faith in the research.

“Try, cry, fly, try”

Tariffs Fuel Uncertainty

The initial tariffs imposed by the executive branch were so severe that many Wall Street analysts panicked. Extreme assumptions are being made about the possible impacts, such as:

  • A global recession
  • A further decline in the demand for the dollar
  • Massive inflation in the U.S.
  • A deep bear market

There have already been signs of slowdown in certain industries, but it is possible tariffs will be eased before the real damage is done. It is also possible tariff pain will be offset by tax cuts, deregulation, and technological advances.

Reasons for Optimism

Here are two reasons we are not as bearish as the rest of the crowd:

  1. The data has not supported the negative sentiment. We understand why many investors and consumers are worried. However, we have not seen a meaningful slowdown in the data yet. When consumer spending data for April was released, the positive results were dismissed as “pull forward” spending, but either way, the data hasn’t changed yet. The same is true for employment — it’s still healthy.
  2. The digital revolution is real, and tech companies are thriving: The DeepSeek news spooked the technology industry in late January, but it was a false alarm as U.S. tech is alive and well.

Earnings Highlights from Major Technology Companies

Riding on the optimism above while also considering the 1Q25 earnings reports from mega-cap technology companies, there are some highlights worth noting from the first quarter of 2025:

  • Microsoft (NASDAQ: MSFT): CFO Amy Hood stated that demand is outpacing supply, particularly in AI and machine learning workloads, driving accelerated infrastructure investments. Net income was $24.7 billion, up 11% year-over-year.
  • Alphabet (NASDAQ: GOOG): CEO Sundar Pichai highlighted the company's extraordinary momentum and commitment to innovation, with net income at $34.54 billion, up 46% year-over-year.
  • Meta (Facebook/Instagram) (NASDAQ: META): CFO Susan Li mentioned the challenge of meeting demand for computing resources, with net income at $16.6 billion, up 35% year-over-year.

The impressive net income growth leads to increased spending to further build the AI infrastructure. Below we explore the capital expenditures of the largest companies in the U.S. as a symbol that the economy still has momentum.

Capital Expenditures

These companies are making significant capital expenditures to build out infrastructure:

  • Alphabet: $75 billion for AI infrastructure, data centers, and cloud computing.
  • Amazon: $104 billion to scale AWS infrastructure and proprietary AI chips.
  • Apple: An estimated $125 billion annually over the next four years for AI enhancements and supply chain resilience.
  • Meta: $64-72 billion for AI infrastructure and GPU clusters.
  • Microsoft: $80 billion to expand AI-enabled data centers and cloud infrastructure.

The $450 billion of capital being spent by just five US companies in 2025 is more money than the total value of the largest company in Europe.  (SAP’s total market capitalization is $360 billion.) 

Conclusion

The current situation is challenging, but we believe this country and human spirit are resilient. U.S. citizens and companies will adapt and persevere. So far, the data supports this notion, but it may be too early for the effects of tariffs to raise their ugly head.

It is crucial to remain faith-based in the data and not let political or personal biases cloud your judgment.

“Oh life is bigger, it's bigger than you.”

Perhaps the digital revolution and U.S. consumers are bigger than one man.

Lear Investment Management (“LIM”) is a Registered Investment Advisor based in Dallas, Texas and registered with the Securities and Exchange Commission. Registration does not imply a certain level of skills or training. This content is for informational purposes only, contains the observations and opinions of LIM, is not intended to provide investment advice, and should not be relied upon for investment decisions. Past performance is no guarantee of future results and information pertaining to LIM’s processes is subject to change at any time without notice.

This document is intended for informational purposes only and does not constitute an offer to sell or a solicitation of an offer to buy any securities. The information contained herein is not intended to be, and should not be construed as, investment advice. The views and opinions expressed in this document are those of the authors and do not necessarily reflect the official policy or position of any SEC registered investment firm.

Investing in digital assets, including Bitcoin, involves a high degree of risk and may not be suitable for all investors. The value of digital assets can be extremely volatile and may be affected by various factors, including regulatory developments, market conditions, and technological advancements. Investors should conduct their own research and consult with their financial advisors before making any investment decisions.

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