Nightmare on Wall Street

Leading Indicators
Rebecca Moretti
Editorial Lead

Good morning,

Liberty Mutual’s new mascot, a disembodied, fully-toothed fluff ball called Liberty Biberty, has sparked so much outrage that it culminated in a protest outside the company’s Boston HQ. But it also inspired Halloween costumes and tattoos. The corporate rage bait is working… In today’s letter:

  • Tech’s terrifying week on Wall Street
  • New Ramp data: Google lags in agentic AI usage
  • 50 states of AI: America’s AI-maxxing map

Darned if they do: investors punish tech from both angles

Before tech earnings last week, we wrote about what we call “the AI earnings scaries.” It ended up being way scarier than we predicted. Alphabet stock plunged 13% on Thursday, its worst day ever, wiping half a trillion off its market cap.

The Google parent reported much higher negative free cash flow than expected and disappointed on Search revenue as consumers leaned on AI summaries. Even YouTube revenue growth slowed (shocking, considering how many ads there are). Meanwhile…

  • Amazon stock dropped ~6% in after-hours trading on Thursday after the ecomm giant fell short of EPS and revenue expectations and posted negative free cash flow of $42.4B, up from $7.6B in the previous quarter.
  • ServiceNow shares sank 27% on Thursday, their worst day ever, after the software firm’s sales outlook disappointed, reviving SaaSpocalypse fears.
  • Intel shares plunged 30% on Friday, their worst day since 1974, after disappointing guidance stemming from softness in the PC market.
  • Microsoft was a standout, beating expectations thanks to strong cloud growth. Free cash flow fell but stayed positive. The company announced plans to raise $25B in fresh debt through bond sales to continue funding its AI buildout.

There appear to be two main reasons for the AI earnings scaries — and they are somewhat contradictory. The fears:

  1. Companies are investing too much in AI. Three years ago, it would’ve been hard to imagine that cash-flush firms like Alphabet, Amazon, or Meta would post negative free cash flows. Now, all three are FCF negative as they spend hundreds of billions on AI and increasingly tap outside financing. Just yesterday, Bloomberg reported that Meta is eyeing $20B from a potential new bond offering.
  2. AI will disrupt traditional tech (aka SaaSpocalypse). We saw this in the reaction to ServiceNow’s earnings, and also in Google’s results: execs said underwhelming growth in Search ads was partly due to lower monetization in its AI Overviews mode. That suggests Google’s own AI push is starting to cannibalize its search business, its biggest source of revenue.

The bottom line:

Until AI starts paying for itself, it could be a lose-lose situation. Investors are punishing tech companies both for spending too much on AI and for not getting ahead of it fast enough. If you invest hundreds of billions, you burn cash. If you don’t, you risk getting left behind. Until AI’s ROI becomes clear, we could see more earnings like this, especially as core businesses start showing signs of slowing.

New Ramp data: Google lags in agentic AI usage

Agentic AI workflows are taking over, from autonomous agents that code while you sleep to travel agents that plan and book your entire vacation.

But where are these agentic workflows concentrated?

Ryan Stevens, Director of Applied Science at Ramp, dove into the data and found that for agentic tasks, businesses tend to choose models from Cursor, Anthropic, and OpenAI over Google.

See the research from Ramp Economics Lab.

Watercooler Data

The state famous for LLCs also leads in LLMs. At about 73% AI adoption, Delaware has nearly a 10 percentage-point lead over AI hubs like California and New York.

Signals Shortlist

🗓️ Leading Events:

Tuesday, November 3: JOLTS. Earnings expected from AMD, Arista Networks, Pfizer, Shopify, Gartner, Yum Brands, Booking Holdings, Coupang, and Duolingo

Wednesday, November 4: Earnings expected from Qualcomm, Arm, Uber, McDonald’s, Snap, Figma, Datadog, AppLovin, Expedia, CVS, e.l.f. Beauty, and Kraft Heinz

Thursday, November 5: Earnings expected from Airbnb, Cloudflare, Affirm, ConocoPhillips, DraftKings, IonQ, Hertz, Peloton, Shake Shack, and Warby Parker

Friday, November 6: October jobs report. Earnings expected from Moderna and Oklo

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Rebecca Moretti•Editorial Lead
As the Editorial Lead at Ramp, Rebecca focuses on melding original data with financial news to craft engaging stories that highlight leading indicators. Previously, Rebecca was the Senior Editor of Robinhood’s Snacks newsletter, which she helmed for five years, and was Senior Editor of SoFi’s On the Money newsletter.
Ramp is dedicated to helping businesses of all sizes make informed decisions. We adhere to strict editorial guidelines to ensure that our content meets and maintains our high standards.

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