Investors are closely watching as major U.S. tech giants prepare to report results this week, with artificial intelligence remaining the dominant market theme.
BNN Bloomberg spoke with David Sekera, chief U.S. market strategist at Morningstar, who said AI-focused companies continue to outperform while others lag behind. He added that investor attention now turns to upcoming earnings from Microsoft, Alphabet, Amazon and Meta for clues on future capital spending and AI monetization.
Key Takeaways
- Artificial intelligence remains the dominant theme this earnings season, with stocks tied to AI infrastructure continuing to outperform.
- Nvidia’s valuation surge illustrates AI’s market power — a 5 per cent gain recently added about US$250 billion to its market cap.
- Investors are watching Microsoft, Alphabet, Amazon and Meta for details on capital spending and AI monetization plans.
- Apple’s limited cloud capabilities and lack of clear AI communication have raised investor concerns about falling behind peers.
- Sekera’s Halloween pick is Diageo, which he expects to stabilize revenue by 2026 and deliver upper single-digit earnings growth.
Read the full transcript below:
ROGER: Investors are digesting a slew of earnings results. Stocks tied to the AI buildout continue to do well, and we’ll find out later today if that theme will continue when Meta, Microsoft and Alphabet report. Let’s dive in with David Sekera, chief U.S. market strategist at Morningstar. David, thanks very much for joining us.
DAVID: Of course, good to see you.
ROGER: Okay, let’s start with those three — Meta, Microsoft and Alphabet. What are we looking at? What do you think we’ll see today from them?
DAVID: I think it’ll be a wide array of things. But as you mentioned, this earnings season — much like the last one — is all about artificial intelligence, and even more so this time around. Stocks tied to the AI arms race are doing very well, and we expect more of the same.
As for Microsoft, that’s a four-star rated stock trading at about a 10 per cent discount to our fair value. We’re watching for revenue acceleration in Azure, its cloud-hosting business. Given how much Microsoft spent on capital expenditures in the first half of the year, we think that’s now starting to come online, so we’re looking for good acceleration there.
We also want more detail on AI usage — specifically, how much demand for computing power is increasing and how much more demand could come over the next 12 to 18 months.
Alphabet is also a four-star rated stock, trading at about a 10 per cent discount to our fair value. We want to hear additional details about its deal with Anthropic and any numbers surrounding that. Otherwise, we’re looking for updates on engagement, especially with AI Overviews and how Gemini has been helping build additional ad revenue.
Lastly, capital spending is key — not just for Alphabet but for all these companies. We want to know how much they’re increasing capex, what exactly it’s going toward and, importantly, the timing and ability to monetize all this investment.
ROGER: Are there any numbers that might raise alarm bells for you?
DAVID: I think it’s really about understanding the path of revenue. The thing that surprised me most — and what came out of the discussions from Nvidia yesterday — isn’t necessarily how large total AI revenue will be, but how much faster it’s arriving than what we had previously modelled.
For Nvidia, our fair value is US$225 a share. That revenue growth is coming faster, so we’ve had to pull some of it forward in our models. When these other companies report, we’ll see whether that still gives us an uplift. Overall, I think the risk for all of these names is still to the upside. We’re still in the accelerating stage of this technological boom, and markets are trying to grasp just how much more growth lies ahead.
ROGER: I want to get your thoughts on Apple and Nvidia. Apple recently crossed the US$4-trillion mark, while Nvidia hit US$5 trillion — and did it in just four months. Remember when Apple hit a trillion and everyone was amazed?
DAVID: It’s funny — that’s really a tale of two stories. The valuations on these companies are now mind-bogglingly large. Nvidia was up five per cent yesterday. That’s a modest percentage move, but given its size, that’s about US$250 billion in added market cap in just one day.
For perspective, only about 33 U.S. stocks have a market capitalization of US$250 billion or more. Essentially, Nvidia’s recent move added the equivalent of another AMD to the total U.S. market capitalization.
We think Nvidia’s stock is getting close to our fair-value estimate at this point. The question now is whether we’ll need to pull forward some of our future revenue growth in the model, which could bump up our valuation.
Apple, on the other hand, is more of a cautionary story. It’s a two-star rated stock trading at a 28 per cent premium to our fair value. Yes, iPhone sales will likely look good this quarter, but the company really needs to communicate its artificial intelligence strategy better to investors.
A number of investors we speak with are concerned about Apple’s reliance on third-party AI providers. The company’s cloud capabilities are limited, and it’s faced some rollout delays. Overall, its AI progress has been underwhelming, and there’s growing concern it may be falling behind.
ROGER: We’ve covered a lot, but before we go, tell us about your Halloween stock pick — Diageo. What do you like about it?
DAVID: This is my stock pick for adults at Halloween. While the kids are out trick-or-treating, I like to have something for the adults. This is actually a great AI use case — I asked ChatGPT for Halloween-themed cocktails.
Fundamentally, alcohol consumption in the U.S. has been on a multi-year downward trend. Before the pandemic, about 65 per cent of adults reported drinking alcohol. That rose to 67 per cent in 2022, but it’s now down to 54 per cent — the lowest level in Gallup’s 90-year history.
Our team expects Diageo’s revenue to stabilize in 2026 and normalize thereafter, which should improve operating margins. We’re forecasting upper single-digit earnings growth, and the stock trades at about 13 times earnings.
And for anyone looking for Halloween inspiration, AI suggested a few fun drinks: the Captain Morgan Zombie Rum Punch, Baileys Pumpkin Spice Martini and the Johnnie Walker Black Fog.
ROGER: I think we’ve got a new segment idea. David, thank you very much for joining us.
DAVID: Cheers!
ROGER: Exactly. David Sekera, chief U.S. market strategist at Morningstar.
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This BNN Bloomberg summary and transcript of the Oct. 29, 2025 interview with David Sekera are published with the assistance of AI. Original research, interview questions and added context was created by BNN Bloomberg journalists. An editor also reviewed this material before it was published to ensure its accuracy and adherence with BNN Bloomberg editorial policies and standards.
