u/BGID_to_the_moon

With earnings season mostly wrapped up, companies in the S&P and Nasdaq have posted over 25% YOY earnings growth in Q1 2026, the highest growth since 2021.

Most of this growth has come from tech companies, especially those involved in semiconductor manufacturing, which makes perfect sense given the growing level of capex from hyperscalers.

My question:
Is the earnings growth as good as it appears? Or is it being largely bolstered by the way accounting treatment works for capex?

Semiconductor companies are able to recognize revenue immediately. But the expenses from hyperscalers don't reflect the vast majority of capex in the current quarter. Capex recognition is deferred over time, roughly 5-6 years from what I've read. So all the revenue benefits from chip companies are showing up immediately, but the costs are deferred over a long period. The net effect in the current quarter is extremely positive GAAP net income, making current quarter income look incredible.

Simplified example:
Meta pays $100 to Nvidia/other chip companies in Q1. Chip companies recognize $100 revenue. Meta only recognizes $5 in expenses in Q1 with the remaining $95 to be recognized over time.
Overall Q1 GAAP net income: $100 - $5 = $95.
Actual net increase in cash: $100 - $100 = $0

Do accounting rules not heavily inflate current quarter earnings? Possibly to an extremely misleading degree?

And the earnings reports show hyperscalers are actually running out of cash and are heavily resorting to debt to fund capex. They haven't actually generated much of a return off their chip investments yet. Not to say they won't, but they will need to quickly otherwise the recognition of the capex will come back to bite GAAP earnings very hard in the coming years.

With earnings season mostly wrapped up, companies in the S&P and Nasdaq have posted over 25% YOY earnings growth in Q1 2026, the highest growth since 2021.

Most of this growth has come from tech companies, especially those involved in semiconductor manufacturing, which makes perfect sense given the growing level of capex from hyperscalers.

My question:
Is the earnings growth as good as it appears? Or is it being largely bolstered by the way accounting treatment works for capex?

Semiconductor companies are able to recognize revenue immediately. But the expenses from hyperscalers don't reflect the vast majority of capex in the current quarter. Capex recognition is deferred over time, roughly 5-6 years from what I've read. So all the revenue benefits from chip companies are showing up immediately, but the costs are deferred over a long period. The net effect in the current quarter is extremely positive GAAP net income, making current quarter income look incredible.

Simplified example:
Meta pays $100 to Nvidia/other chip companies in Q1. Chip companies recognize $100 revenue. Meta only recognizes $5 in expenses in Q1 with the remaining $95 to be recognized over time.
Overall Q1 GAAP net income: $100 - $5 = $95.
Actual net increase in cash: $100 - $100 = $0

Do accounting rules not heavily inflate current quarter earnings? Possibly to an extremely misleading degree?

And the earnings reports show hyperscalers are actually running out of cash and are heavily resorting to debt to fund capex. They haven't actually generated much of a return off their chip investments yet. Not to say they won't, but they will need to quickly otherwise the recognition of the capex will come back to bite GAAP earnings very hard in the coming years.

Bond yields are ripping higher at an astounding pace. 5% is within reach for the 10 year. And it makes perfect sense given the indefinite closure of Hormuz, painfully high inflation, and increasing expectations for a Fed rate hike.

Yet markets are only 2-3% off all time highs. And just as surprising, the VIX is barely moving higher. Markets have reacted much more violently to similar conditions in the past. When yields made a similar move last year during the Liberation day fiasco, stocks dropped over 15%. So why are stocks barely reacting this time?

I understand tech earnings have been solid. Yet non-tech heavy indices like the dow and russell are also barely off all time highs. Rate sensitive indices full of profitless companies should have been crushed by high yields.

I personally suspect the muted market reaction is due to expectations that Trump will cave in to rising yet yields again. For context, he eased back on his tariff threats last April after the 10yr exceeded 4.6% and the 30yr exceeded 5%, and specifically cited high bond yields as the reason for granting global tariff relief. Well yields are now higher than they were last year.

Are markets expecting Trump to make policy decisions based on high yields again this year? If yields exceed his pain threshold, he could just walk away from the Iran war and privately give in to Iran's demands for concessions. Does this seem to be the base case the markets are pricing in?

The market pumped yet again this morning on supposed peace deal progress, this time on rumors of oil sanctions relief for Iran. Good for a 1-1.5% pump from the overnight low.

The market has pumped more times than anyone can count on peace talk hopes since April 1. Yet this entire time, America and Iran have not gotten any closer on resolving the nuclear issue, the overarching issue behind this conflict. About an hour ago, Iran even blatantly stated they will not trade nuclear rights for peace, as they've been saying the entire past 1.5 months.

This one line should've single-handedly ended peace talk hopes so many times. It's blatantly obvious these guys are too far apart on peace terms. America wants the uranium, Iran doesn't want to give it up. You can't meet in the middle and give up half - there's no room for compromise.

What are they even 'negotiating' about at this point? A little bit of sanctions relief rumor here, an iranian oil vessel passes the bloackade rumor there, nothing resolves the nuclear issue. Why do both sides keep pretending to negotiate on tertiary issues and continuing the ruse?

But whoever is driving the market keeps allowing it to pump on 'peace hopes' knowing full well the nuclear issue is at a complete standstill.

The market pumped yet again this morning on supposed peace deal progress, this time on rumors of oil sanctions relief for Iran. Good for a 1-1.5% pump from the overnight low.

The market has pumped more times than anyone can count on peace talk hopes since April 1. Yet this entire time, America and Iran have not gotten any closer on resolving the nuclear issue, the overarching issue behind this conflict. About an hour ago, Iran even blatantly stated they will not trade nuclear rights for peace, as they've been saying the entire past 1.5 months.

This one line should've single-handedly ended peace talk hopes so many times. It's blatantly obvious these guys are too far apart on peace terms. America wants the uranium, Iran doesn't want to give it up. You can't meet in the middle and give up half - there's no room for compromise.

What are they even 'negotiating' about at this point? A little bit of sanctions relief rumor here, an iranian oil vessel passes the bloackade rumor there, nothing resolves the nuclear issue. Why do both sides keep pretending to negotiate on tertiary issues and continuing the ruse?

But whoever is driving the market keeps allowing it to pump on 'peace hopes' knowing full well the nuclear issue is at a complete standstill.

Treasury yields, oil, and inflation have been climbing for 3-4 weeks. And we’ve all known the US and Iran have been no where near signing a peace treaty and opening Hormuz since mid-late April.

Yet none of this mattered to global markets for an entire month. The rising 10yr crushed the market last year, yet has had no impact on markets this year. Why do stocks suddenly care now, a night where nothing meaningful has actually happened?

The timing of market reactions has always been incredibly suspect. The institutions driving the direction of the market are obviously sophisticated enough to be aware of all these negative factors. Yet they conveniently chose to ignore them till this moment, letting markets pump non stop for well over a month in the face of blatantly horrific macro trends. We’re facing the greatest energy crisis in history that will obviously weigh heavily on gpd, yet markets pumped away. Suddenly we get a global sentiment shift with no real trigger or change in course of events.

The suspicious timing of trend reversals is what has always made the stock market difficult to trust. If global markets take a substantial fall from here because of negative factors that were well known far in advance, it just adds to mounting evidence that stocks are openly manipulated and should shake any reasonable individual’s faith in the markets.

Apple's up about 3% after hours after issuing unexpectedly high Q2 revenue guidance (14-17% revenue growth vs 9% expected). It also mentioned that margin % would remain consistent at around 48%.

However, at the same time, it mentioned that memory costs are rising. From the earnings transcript:

"I can tell you that beyond the June quarter, we believe memory costs will drive an increasing impact on our business and we'll continue to evaluate this"

So with memory costs set to increase significantly enough that it's worth calling out in the transcript, how is Apple able to maintain 48% margin?

They must be raising product prices to maintain margin %. Let me know if I'm thinking about this too simply, but did they guide revenue higher just because they're going to implement unexpected price increases in response to rising costs? They may have guided revenue higher, but they didn't say operating income would increase as well.

BOJ decided to buy up the Yen today, reducing USDJPY from 160 to 156 almost instantly. How is this a good thing though? Strengthening the yen further pushes up Japan's own treasury yields which are already at historically high levels. And this theoretically should weigh on both their markets and on global markets due to: 1. rising US treasury yields as BOJ sells treasuries, 2. carry trade unwind as the yen strengthens, and 3. contagion.

But so far, Nikkei and global markets are reacting like this is great news. Dow and Russell are up 1-2% and Nasdaq has recovered morning losses despite other pretty catastrophic macro conditions - inflation is at 3 year highs, consumer savings and spending is at multi year lows, crude at multi decade highs, etc.

All of this negativity is undone simply by the BOJ buying up the yen?

I'm confused about the reaction by US treasuries to the BOJ's intervention. If the BOJ sold treasuries and sold dollars to buy yen, why are treasury yields falling? They should be rising, given the apparently large size of the intervention.

https://preview.redd.it/4xxnknvjscyg1.png?width=428&format=png&auto=webp&s=fdbb1de6bc0be512468a3bb68054ff599133856a

Bank of Japan decided to prop up the Yen today. With the Nikkei and the US markets at all time highs. The move pushed the USD down, which also pushed crude oil down. USD and crude were high as a natural result of current events. It's natural price discovery at work and the BOJ put an end to it with forced intervention.

They didn't even choose to pump the markets while they were weak. We're literally at the highs. The slightest sign of stress and they have to jump in to keep the market rallies going.

The market pumps are just fueled by constant government intervention. And they respond faster and faster. It makes it impossible to trust US and global markets because true price discovery is gone. Any time there's a remote sign of weakness, governments and banks intervene and induce a rally. Even while markets are in the most obvious bubble of the last 2 decades - they just can't help themselves even if they know they'll blow the bubble up even further.

And in the meantime, inflation is at 3-4 year highs across CPI, PPI, and PCE with crude at multi decade highs. Personal savings and consumption are at multi-year lows, suggesting extreme consumer weakness. But none of that matters. The market continues to be fueled by intervention and AI hopes, which haven't and will not translate to healthier consumer earnings/spending and broader markets earnings beyond chip manufacturing companies for a long time.

The entire reason stocks declined 10% during the war with Iran was the fear of an extended conflict that could lead to Hormuz being closed and oil prices being higher for longer. Stocks more than rebounded to new highs after a cease fire and the belief the US admin couldn't stomach a prolonged conflict and high oil prices.

Over the past few days, the very reason the market initially took a significant dump has mostly been confirmed. Hormuz is likely to be closed for longer than anyone expected back in March. Rising oil, combined with rising treasury yields due to expected inflation, have become a reality.

Yet stocks are mostly unmoved by this new reality. How's this possible? Are stocks really being artificially propped up until Spacex IPOs so that interested parties don't take a massive haircut? What could be the reason the market has all of a sudden chosen to ignore negative factors it once reacted violently to?

And before anyone says tech stocks have great earnings, IWM is still near ATH and it's full of profitless companies that are the most sensitive to high costs and high yields. These are the same stocks that took a massive dive in 2022 over high inflation and yields. Yet they're not behaving the same way as of 3 weeks ago.

The entire reason stocks declined 10% during the war with Iran was the fear of an extended conflict that could lead to Hormuz being closed and oil prices being higher for longer. Stocks more than rebounded to new highs after a cease fire and the belief the US admin couldn't stomach a prolonged conflict and high oil prices.

Over the past few days, the very reason the market initially took a significant dump has mostly been confirmed. Hormuz is likely to be closed for longer than anyone expected back in March. Rising oil, combined with rising treasury yields due to expected inflation, have become a reality.

Yet stocks are mostly unmoved by this new reality. How's this possible? Are stocks really being artificially propped up until Spacex IPOs so that interested parties don't take a massive haircut? What could be the reason the market has all of a sudden chosen to ignore negative factors it once reacted violently to?

And before anyone says tech stocks have great earnings, IWM is still near ATH and it's full of profitless companies that are the most sensitive to high costs and high yields. These are the same stocks that took a massive dive in 2022 over high inflation and yields. Yet they're not behaving the same way as of 3 weeks ago.

The entire reason stocks declined 10% during the war with Iran was the fear of an extended conflict that could lead to Hormuz being closed and oil prices being higher for longer. Stocks more than rebounded to new highs after a cease fire and the belief the US admin couldn't stomach a prolonged conflict and high oil prices.

Over the past few days, the very reason the market initially took a significant dump has mostly been confirmed. Hormuz is likely to be closed for longer than anyone expected back in March. Rising oil, combined with rising treasury yields due to expected inflation, have become a reality.

Yet stocks are mostly unmoved by this new reality. How's this possible? Are stocks really being artificially propped up until Spacex IPOs so that interested parties don't take a massive haircut? What could be the reason the market has all of a sudden chosen to ignore negative factors it once reacted violently to?

And before anyone says tech stocks have great earnings, IWM is still near ATH and it's full of profitless companies that are the most sensitive to high costs and high yields. These are the same stocks that took a massive dive in 2022 over high inflation and yields. Yet they're not behaving the same way as of 3 weeks ago.

Oil continues to gradually rise after another weekend without progress in peace talks. Pass through inflation is already aggressively evident in our everyday lives - vegetable prices are nearly 2x higher than they were a few months ago, delivery companies have raised fees, etc.

The longer hormuz stays closed, the worse inflation gets, and the less likely the Fed cuts rates even with Trump's newly selected chairman set to lead the Fed - everyone, especially sophisticated investing institutions and the Federal reserve are fully aware of this reality.

BTC, bonds, and metals are moving down today as you'd expect, pricing in the threat of persistent overall inflation.

Yet the stock market had a brief dip today then pumped right back to positive. Even Chinese stocks are declining today due to the lack of progress with Iran. China's market actually appears far more sane than US markets, which is a surprising twist.

Why are US stocks blatantly ignoring blaring red flags that other assets are pricing in? What is holding up the market? Are market participants truly bullish in the face of quickly deteriorating macro conditions?

Or is there something nefarious going on behind the scenes that's preventing true price discovery (such as the need to prop up tech stocks until the spacex ipo)?