The Case for AI Is (Finally) Showing Up in Earnings

The artificial-intelligence boom is raging, fueled by a mad dash to add computing capacity. Tech giants are funneling billions of dollars to construction companies and industrial suppliers of equipment and power to build the vast data centers that the technology requires.

It feels frothy and ripe for a correction because of the hype about AI and the historical similarities to the dot-com bubble of the mid-1990s, which was propelled by unrealistic valuations and risky bets on flimsy business models chasing the dream of online riches until it burst early in the new century. And while the internet’s promise to increase efficiency and transform society certainly came true, the Nasdaq Composite Index didn’t match its March 2000 peak until 15 years later.

This history has made some investors wary of an overshoot on this AI infrastructure build-out, even though it’s in early stages. The only way to justify the expenditure in their eyes is for AI to provide the return on investment that companies and individuals are willing to pay for. The market wants to see use cases — beyond summarizing a missed meeting or drafting a slick memo — that increase worker productivity and make the technology indispensable and ubiquitous.

Evidence of these cases is starting to pop up in earnings reports as companies embrace AI tools.