Stocks closed mixed yesterday. The tech-heavy Nasdaq took the brunt of the selling, giving up -1.51%. But the Dow and the mid-cap S&P 400 were up 0.53% and 0.68% respectively.

Another tech drubbing, this time by Advanced Micro Devices (who on Tuesday afternoon, positively surprised on both top and bottom lines, showed double-digit sales and earnings growth, and guided higher on Q1 revenue) weighed on the market, with AMD falling by -17.31% yesterday.

Tech has struggled ever since Microsoft reported stellar earnings and sales last week. In spite of their own double-digit top and bottom line growth, concerns were raised over their rising CapEx (read AI spending). MSFT has fallen by -14% over the last 5 days.

And doubt has been cast on whether the massive AI investments will ever payoff.

But AMD CEO Lisa Su, said "AI is accelerating at a pace that I would not have imagined."

It's clear, the companies making these investments see this demand, and have determined they will produce high-return results.

Alphabet reported after the close yesterday and posted a positive EPS surprise of 9.73%, and a positive sales surprise of 2.58%. That translated to a quarterly EPS growth rate of 31.2% vs. this time last year, and a sales growth of 19.1%. But they did project an increase in CapEx (driven by AI infrastructure spending), which will be nearly double that of the prior year. They also pointed to their Google Cloud business and reported a 48% increase, and saw cloud backlogs rise by 55% to $240 billion at the end of the quarter. They were down -2.16% in the regular session before earnings, and were lower by another -1.50% in after-hours trade following earnings.

We'll get more earnings today with another 216 companies on deck to report, including another Magnificent 7 stock, Amazon after the close.

In other news, yesterday's MBA Mortgage Applications showed the Composite Index down -8.9% w/w with Purchases off -14.4% and refi's off -4.7%.

The PMI Composite Index ticked up to 53.0 vs. last month's 52.7 and views for 52.8. The Services Index ticked up as well, coming is at 52.7 vs. last month's 52.5 and estimates for the same.

The Services Index was even with last month at 53.8 and in line with the consensus.

And the ADP Employment Report showed private payrolls expanded by 22,000 in January vs. forecasts for 45,000.

Today we'll get Weekly Jobless Claims and the Challenger Job-Cut report.

The headlines lately are suggesting that the AI boom is over. But in my opinion, that couldn't be further from the truth. We are still in the relatively early stages of the transformational AI boom. And I believe it has years more to go. To be sure, it will enter different phases along the way. Companies like NVIDIA, for example, are selling the AI infrastructure (chips, servers, AI training systems). Others have to buy these products to build their AI models and tools. Then those tools are sold to others to build their products, or used internally to build their own products.

We are in the infrastructure phase right now and it's accelerating. The tools and models phase are in the early innings. And the application and productivity phase has really just begun. That's where the real broader economic payoff happens. But the winners will multiply as the cycle moves thru its stages.

See you tomorrow,