High-tech hyperscaler boosts energy and AI prices in first-quarter profit after Iran war

The last time tech hyperscalers addressed Wall Street was three months ago, they announced plans to spend well over $5 trillion this year on building artificial intelligence infrastructure.

That was before the United States invaded Iran, causing oil prices to soar and leading to a significant slowdown in helium production, which is essential for semiconductor manufacturing. Meanwhile, the global memory crisis is worsening, forcing tech giants to pay for the capacity they need to meet their data center ambitions.

But they will pay for it. Anthropic’s Claude models and coding tools are growing at historic rates, and OpenAI’s ChatGPT and Google Gemini continues to gain popularity in homes and offices, and the world’s most valuable technology companies show no signs of backing away from the increases they say are necessary to meet the insatiable demand for computing resources.

Now they need to be on par with investors about what that means for spending, profitability and cash flow. And they will do it within minutes.

alphabet, Amazon, meta and microsoft All companies are scheduled to report their quarterly results after the close of trading on Wednesday, just over two months since the United States and Israel launched a joint attack on Iran. The group has held up well on Wall Street, with only Microsoft falling for the year, even though oil prices have risen about 50% since the war began and are up almost 80% this year.

Ted Mortenson, technology strategist at Baird, said the market was in a “complacent phase” and investors expected President Donald Trump to withdraw from the Middle East and the turmoil would be temporary. He called it the “TACO trade thought process,” after the abbreviation for Trump Always Chickens Out.

But Mortenson is personally very concerned. Part of the reason is that investors haven’t shown any of the “terrified panic and capitulation” he saw during the 2000 dot-com bust.

“This is probably one of the most mispriced cycles of my career,” Mortenson said.

Analysts don’t expect much change in capital spending forecasts this year. Average forecasts for Alphabet, Amazon and Meta are all within guidance provided in January, according to FactSet. Microsoft has not released guidance on capital spending, but analysts on average expect growth to rise 66% to $107.5 billion in the fiscal year ending June, the lowest among hyperscalers.

In his annual letter to shareholders earlier this month, Amazon CEO Andy Jassy defended his company’s plan to spend $200 billion this year, an increase of more than 50% from 2025, writing, “We are not going to be conservative in how we approach this.” He did not mention the Iran war or rising energy prices. And Microsoft President Brad Smith told CNBC’s Power Lunch in March: “When demand exceeds supply, we need to increase supply.”

Amazon Web Services has no plans to raise prices even as it faces rising costs, according to people familiar with the matter who asked not to be identified discussing internal strategy.

Analysts at KeyBanc wrote in a preview of Microsoft’s earnings last week that they were watching two things: “impact from the Middle East” and “impact from cloud memory pricing.” Analysts recommending buying the stock noted that “print checks and research are largely positive.”

In an Amazon preview, KeyBank analysts said they expected sales to meet expectations, “despite downside risks to operating income from the Middle East and gas.” They also have a Buy rating on the stock.

Citizen analysts said in a report on Meta last week that they expect the social media company to raise its capital spending outlook for this year, citing recent multibillion-dollar data center deals. Meta attributed its plan to cut 10% of its workforce, or about 8,000 people, to its costly AI efforts, and told employees in a memo on Thursday that the job cuts were “part of our ongoing efforts to enable the company to operate more efficiently and offset other investments we are making.”

Meanwhile, Microsoft told employees on Thursday that it would offer a voluntary buyout. The plan will affect 8,750 people, or about 7% of the U.S. workforce, according to people familiar with the plan.

One of the key questions investors are asking is whether rising oil prices and memory shortages are factored into forecasts, or whether companies have enough tools to mitigate the impact.

Rising oil prices are pushing up diesel prices, which have risen about 42% since the start of the Iran war, according to data from the U.S. Energy Information Administration. Data center operators pay high fees for transportation and manufacturing, but are also affected by rising fuel prices.

AI chip maker Cerebras said in its IPO prospectus earlier this month that data center power costs account for a “substantial portion” of its operating expenses.

In March, an Iranian attack damaged a liquefied natural gas plant in Qatar that produces helium, halting production. The U.S. Geological Survey estimates that before the war, Qatar produced more than a third of the world’s helium supply. Sulfur, another chemical that companies rely on to make chips, has also increased in price due to concerns about shipping through the Strait of Hormuz.

Amid a fragile ceasefire agreement between the US and Iran, tanker traffic through the strait remains very low. Baker Hughes, one of the world’s most influential oil drillers with extensive operations in the Middle East, said last week it was working on the assumption that the strait might not fully reopen for several months.

“Ultimately, there remains significant uncertainty regarding the duration and depth of the dispute,” CFO Ahmed Moghal told investors on the company’s first-quarter earnings call.

Benjamin Lee, a professor of electrical engineering and computer science at the University of Pennsylvania, said if the global price of liquefied natural gas continues to rise as it has since the Qatar attacks, the cost of electricity to power data centers will likely rise as well.

But Robert Tummel, portfolio manager at Tortoise Capital, an energy fund, said the United States is the world’s largest supplier of LNG and could be insulated from the volatility in global energy markets.

“The United States has so much natural gas that we’re not only self-sufficient, but we export a significant amount, and we probably should be exporting more,” Tummel said. He believes it will be a competitive advantage for domestic technology companies.

“Microsoft, Meta and Google can build these data centers and spread them all over the United States. Yes, they’re expensive, but the electricity rates, which are a big component of the cost, are nowhere near what they are internationally,” Tummel said.

Still, building the gigawatt-scale data centers promised by these companies will require massive new energy facilities. Lee said there are all sorts of hurdles to making that happen, including regulatory and approval processes, connecting power plants to the grid, “and figuring out who’s going to pay what share of those costs.”

Cantor Fitzgerald analyst Deepak Mathivanan said investors want to know whether tech giants like Meta’s data center and computing investments are “proceeding as planned.” He said that it is currently too early to tell whether the Iran war will have an impact on AI build-up, and that the lack of historical precedent makes it difficult to predict second- and third-order effects.

“There is pretty healthy demand that justifies some of the capacity increases,” Mathivanan said, citing examples such as the effectiveness of Meta’s AI advertising and the popularity of new models and services. “But how these uncertainties manifest in terms of planning and actual implementation is very elusive.”

Furthermore, the memory loss that began before the war only intensified. Memory maker stock prices rise due to AI-induced shortage micron Over 550% in the past year.

Micron CEO Sanjay Mehrotra said in March that the company expects demand to outstrip supply for standard computer server memory through 2026. Nvidia Chips and solid state drives for data centers.

Device manufacturers also support this. A Microsoft spokesperson said the company increased the price of its Surface PC by several hundred dollars due to memory and component costs.

Technology industry researcher IDC predicts that dynamic random access memory (DRAM) will cost $9.71 per gigabyte in 2026, up from $3.76 per gigabyte in 2025. Marta Norton, chief investment strategist at Empower Investments, said the scale of the memory cost increase is “staggering and has implications for cloud providers and NVIDIA.”

Spot prices for Nvidia H200 GPUs reached $3.82 per hour this month, up from $2.27 in January, according to data from Ornn, a startup that collects market data and builds a computing power exchange.

Gil Luria, DA Davidson Analyst, covers Amazon, Google, Microsoft and more oracle“Hyperscalers are absorbing these cost increases,” he said. One concern, he said, is that “these bottlenecks make everything more expensive and put pressure on everyone along the way.”

In an April 15 note, Baird analyst Will Power raised his forecast for Microsoft’s fiscal 2027 capital spending from $161.6 billion to $180 billion, citing memory shortages and rising memory costs. He increased his forecast for calendar year 2026 by about 4% to $157.5 billion.

Acre Security, which sells physical and digital security products to data center operators and critical infrastructure providers, has not yet seen the impact of rising oil prices, but could be affected, CEO Kumar Sokka said.

Long before the war began, President Trump’s tough tariffs made it difficult for Acre to source parts for products such as cameras and intrusion detection systems, Socka said, adding that the company’s contract manufacturers were moving production to places like Portugal, the Philippines, Mexico and parts of the United States.

The speed of data center construction and unexpected speed bumps such as tariffs are forcing companies to learn how to quickly respond to sudden changes, Socka said.

“We need to be smart and carefully monitor our funnels, pipelines and supply chains to avoid negative impacts to our business,” he said.

One thing that’s clear heading into this week’s earnings report is that equity investors remain bullish on AI trading. Nvidia hit a record high on Monday, with a valuation of more than $5 trillion. and intelThe company, which has finally entered the AI ​​chip market, posted better-than-expected earnings and had its best day on Wall Street since 1987 on Friday.

The Nasdaq rose 15% in April, heading for its best month since April 2020.

“There is a high level of confidence that these shocks will not last long or be completely overcome to preserve margins,” said Skanda Amarnath, executive director of the think tank Employ America.

Dan Taylor, chief investment officer at Mann Numeric, put it even more succinctly: “It’s more profitable to be bullish than bearish.”

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