Final Bite of the Apple

Farewell to Tim Cook

Summary: The economy remains in pretty good shape. So far, higher energy prices have not affected spending. Compute demand for AI appears limitless.

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Macro

The consumer is in pretty good shape
“The consumer is in great shape. If you look at all of our credit metrics, if you look at the fact that these tax refunds from the Big Beautiful Bill will exceed what they did last year, if you look at spending, spending is up kind of mid-single digits year-over-year. Online spending is up maybe double digits...So on the consumer side, the consumer -- actually, our consumer is in good shape.” - KeyCorp (KEY 0.00%↑) CEO Christopher Gorman

“I think the consumer is still in pretty good shape. It’s been very consistent over the past few quarters. We’re seeing signs of strength when you look at spending patterns. Credit continues to outperform our expectations. I think the macro environment is still pretty constructive. Strong labor market.” - Synchrony Financial (SYF 0.00%↑) CEO Brian Doubles

“The economy is still extremely strong. We just we all just reported our first quarter results in the banking space. Loan demand is decent. Delinquencies on the consumer side are extremely well controlled...Consumer spend is growing on a year-over-year basis, week over week over week, anywhere between 5% and 7%. They’re spending more money on gas, but making adjustments in some of the other categories, which is what, you know, you would have expected.” - Wells Fargo (WFC 0.00%↑) CEO Charlie Scharf

“So, the U.S. consumer remained healthy, and the overall economy remained resilient through the first quarter. The unemployment rate improved slightly in the quarter despite some high-profile headlines about layoffs. The total volume of job losses and new jobless claims remains low and stable. Income growth continued to run ahead of inflation. Consumer spending remained robust...There’s a lot of noise in the external environment, but the consumer is showing quite a bit of resilience.” - Capital One Financial (COF 0.00%↑) CEO Richard Fairbank

“Card Member spending grew 10% on a reported basis, and this is the highest quarterly growth in 3 years, driven by strong growth across both Goods & Services and T&E.” - American Express (AXP 0.00%↑) CEO Stephen Squeri

“The consumer is still broadly resilient. Delinquencies are still managed well.” - Equifax (EFX 0.00%↑) CEO Mark Begor

People feel generally good
“People feel generally good about the economy, unless energy prices spike to the point where we end up in a situation where there could be a recession in parts of the world that are energy specific -- or energy sensitive, maybe a global recession.” - CBRE Group (CBRE 0.00%↑) CEO Robert Sulentic

But there is nervousness
“Businesses have gone into this in a strong financial shape. So those are all the good things, but when you ask them how they feel, everyone is nervous. They are not laying off, but they are not hiring to the extent that they otherwise would. I would describe all this as neutral, just beginning to show some potential for negative impacts. That does not mean these impacts will be meaningful. The real question is how long oil and gas prices stay high.” - Wells Fargo (WFC 0.00%↑) CEO Charlie Scharf

“As we look ahead, the macroeconomic backdrop remains constructive, although we acknowledge that there has been some softening of sentiment in the last quarter. When we look at facts, consumer spend, core loan demand, and credit delinquency trends are all indicating relative stability.” - US Bancorp (USB 0.00%↑) CEO Gunjan Kedia

So far, higher energy prices have not had an impact on spending
“We’ve already seen energy prices spike sharply over the past 6 weeks. Inflation moved higher in March, largely because of the higher gas prices. So if energy prices remain elevated for an extended period of time, that would be a real headwind for consumers and probably a drag on the overall macro economy. But so far, we’ve not seen any adverse effects on our portfolio.” - Capital One Financial (COF 0.00%↑) CEO Richard Fairbank

“Broadly speaking, during March, when the conflict was in its early stages, consumer behavior across our segments remained fairly resilient. It’s difficult to predict how the conflict will play out, but the duration of higher oil and energy costs will be something for us to watch.” - Genuine Parts (GPC 0.00%↑) CFO Herbert Nappier

“First and foremost, your booking windows would shrink. They have not so far this year. I would expect people to transition away from air travel to drive to destinations. That has not transpired so far this year. I would also look at VPGs to modify. They haven’t.” - Travel + Leisure Co. (TNL 0.00%↑) CEO Michael Brown

“We are not seeing a lot of impact from tariffs or from the events in the Middle East at this point, but watching really just focused on some just increases to expenses in certain areas such as restaurants and consumer-focused businesses that seem to be what we’re watching the most these days.” - Zions Bancorporation (ZION 0.00%↑) Chief Credit Officer Derek Steward

A new Fed Chair is on the way
“...the fatal policy error going back four or five years is still a legacy that we’re dealing with. We need, in my judgment, fundamental policy reforms to fix it. And while it’s true that inflation is less problematic, meaning the rate of change in prices is less severe than it was some years ago, hardworking Americans are no doubt feeling it. I think that means a regime change in the conduct of policy. I think that means a different new inflation framework. I look forward to working with my colleagues at the Fed if confirmed to achieve that. I think it means, as you suggested, using tools differently. The Fed has an interest rate tool and a balance sheet tool. My view is that the interest rate tool gets into the cracks. It’s fairer. The balance sheet tool disproportionately helps those with financial assets. The interest rate tool hits the entire economy. So we need a new framework, new tools. And I’d also say, Mr. Chairman, new communications.” - Federal Reserve Former Member Kevin Warsh

He says he didn’t commit to lowering rates
“The president never once asked me to commit to any particular interest rate decision, period, and nor would I ever agree to do so if he had, but he never did. I was honored that he nominated me. Like everyone else in the committee and the world, I’ve heard his view on interest rates. It sounded very similar to me to every other president in economic history that I’ve studied.” - Federal Reserve Former Member Kevin Warsh

International

Chinese consumer confidence is still low
“The market is still difficult. Consumer confidence is still low and down versus the normal equilibrium. The market growth is still negative across most channels, and the only growth you see is in online and in Douyin.” - Procter & Gamble (PG 0.00%↑) CFO Andre Schulten

Reshoring trends continue
“The other thing that we are seeing is people relocating from the Far East to Mexico and really shortening their supply lines and taking control that way. So we’re starting to see it, but I wouldn’t say it’s the biggest driver at all of, say, loan growth. It’s very early days on that front.” - KeyCorp (KEY 0.00%↑) CEO Christopher Gorman

Financials

Credit quality remains good
“We’re not seeing an upward trend in credit losses within the consumer area. The consumer remains resilient. Sentiment has softened, but spending and credit behaviors remain stable, supported by low delinquencies and meaningful balance sheet buffers.” - US Bancorp (USB 0.00%↑) CFO John Stern

“Credit performance remains excellent with both delinquency and write-off rates still below 2019 levels.” - American Express (AXP 0.00%↑) CFO Christophe Le Caillec

“In our Domestic Card business, our credit metrics continue to improve on a year-over-year basis in the quarter. On a sequential quarter basis, our charge-off rate moved in line with seasonality, while our delinquencies improved relative to what we would expect from normal seasonality.” - Capital One Financial (COF 0.00%↑) CEO Richard Fairbank

HFT firms are showing demand for TPUs
“TPUs, definitely a big market is the AI labs, but we’re seeing interest from new segments of the market. So a big new segment is financial services, and when I say financial services, capital markets, and the reason is that today, if you’re a trading firm, a capital markets firm, you spend a lot of time running algorithmic trading, and algorithmic trading is running numerical algorithms on traditional Intel-type cores, x86 cores. Now what they find is that models can do inferencing, and the inference performance is actually better than traditional numerical computing.” - Alphabet (GOOG 0.00%↑) Google Cloud CEO Thomas Kurian

Office leasing trends suggest that companies aren’t planning headcount reduction
“So to give you a statistic, if really there was this view that all these jobs are going to be eliminated by AI, you would think that the users of space would be backing off on their leasing of space, not just currently, but you would think they’d be taking shorter-term leases for fear that they weren’t going to need the space in the future. The average length of lease we’re doing in office buildings today hasn’t decreased by a day. It simply hasn’t decreased. It’s held steady for the last several years, and it’s holding steady now. So to put your money where your mouth is, things would suggest that the fears around job losses aren’t quite as high as the headlines.” - CBRE Group (CBRE 0.00%↑) CEO Robert Sulentic

Consumer

The consumer is bifurcated by income
“The consumer story is a bit more mixed, with middle and upper income consumers continuing to spend in a manner supportive of the overall economy, while lower income households continue to feel pressure from the cumulative impacts of inflation.” - Huntington Bancshares (HBAN 0.00%↑) Stephen Steinour

Is the premium consumer immune to inflation?
“Look, we’re not representative of the economy...the premium consumer is still spending. Are they immune? You know, our card members are rolling with it. They’re still spending in restaurants, they’re spending in lodging, they’re spending on travel..I think one of the leading indicators here that they’re going to continue to spend is the advanced travel bookings. They continue to book in advance. So only time will tell what will happen, but we feel really confident.” - American Express (AXP 0.00%↑) CEO Stephen Squeri

“Premium demand remains strong with Q1 premium revenues up 13.6% on 4.4% increase in capacity. Premium RASMs were up 8.9% year-over-year, leading main cabin by 4 points.” - United Airlines (UAL 0.00%↑) CEO Scott Kirby

Travel demand has remained robust
“American delivered record revenue in the first quarter, and we’re on track for another record in the second quarter..Even in a volatile operating environment, our pretax margin improved by nearly 2 points year over year, and we still anticipate modest profitability for the year, assuming the current forward fuel curve...Demand for American’s product continues to grow, and during the quarter, we recorded the nine highest revenue intake weeks in our history. Q1 revenue grew 10.8%, and we expect this demand strength to continue as we anticipate Q2 will deliver revenue growth of approximately 15%.” - American Airlines (AAL 0.00%↑) CEO Robert Isom

“I think we’re a bit in uncharted territory. I think we can tell you right now that all types of customers remain particularly strong. Like just in the last week or so, our yields are now up 20% year-over-year. But even more importantly, the business part of our business, business traffic, is over the last two weeks, up 25%, business revenue up 25%. And that’s accelerated from up 16% in quarter one and 9% late last year.” - United Airlines (UAL 0.00%↑) CCO Andrew Nocella

Gas is only ~2% of consumer spending
“Prior to the start of the Iran war, our consumer borrowers were spending roughly 2% of their income on gas. Since then, even with a meaningful increase in gas prices, we’ve seen only a small increase in spending on gas relative to income as consumers adapt their behavior to higher costs at the pump. This trend is similar to what we observed during 2022 when geopolitical issues sparked an even sharper rise in gas prices that persisted for many months during a period of much higher overall inflation.” - Enova International (ENVA 0.00%↑) CEO Steve Steve Cunningham

Technology

There’s not enough compute in the world to meet demand
“I think we were heading to this compute-powered economy. There’s not going to be enough compute in the world to meet the demand.” - OpenAI President Greg Brockman

“I think the main thing to know is. We have more demand than supply. For the first time in my 32 years at this company, we cannot give everybody everything they want to buy. So we need to build out this expansion... if you have sales, you can’t make because you don’t have capacity, and as soon as the capacity comes online, you actually start making more money. It’s about as simple as that.” - Microsoft (MSFT 0.00%↑) President Brad Smith

“I think for the next 10 years, there will always be more demand than supply...there’s always a shortage, there’s never enough.” - Alphabet (GOOG 0.00%↑) Google Cloud CEO Thomas Kurian

“I mean, Terafab is not some sort of mechanism to generate leverage over our chip suppliers. It’s just literally, we don’t see a path to having enough, a sufficient quantity of AI chips down the road. As we scale production to high levels, just the rate at which the industry is growing in logic, but even more so in memory, it just doesn’t -- we just anticipate hitting a wall if we don’t make chips ourselves. So that’s the reason for the Terafab.” - Tesla (TSLA 0.00%↑) CEO Elon Musk

Agents are driving an explosion in token demand
“These swarms of agents actually just took humans out of the loop. We have a whole other scaling law, where before, the chatbot only needed to be as fast as you could read, and you could type. Now I’ve got a chatbot that actually can read and write as fast as another chatbot can read and write another chatbot, and you can see where this is going. It’s causing an explosion of a need for more compute and also another path to optimize.” - NVIDIA (NVDA 0.00%↑) VP of Hyperscale and High-Performance Computing Ian Buck

“I think one of the points I think everybody would appreciate on this call is that as agents come to market, it’s a demand multiplier. That represents to us a 5x to 30x more tokens per task, and that’s the fundamentals of what AI is delivering. That is going to really drive another inflection point, not just on the training to inference, but then as agents and agentic come into the market, we’re very excited about that.” - Digital Realty Trust (DLR 0.00%↑) CTO Chris Sharp

Memory is one area of bottleneck
“As you can see, we are actively expanding supply to meet customer demand, for example, increasing our investment, but also at the same time, it appears that supply will remain short of demand for the time being. For the time being, the supply will fall short of the structurally increasing demand...Suppliers are expanding their investment by resuming fab construction and infrastructure investment to secure ramp-up capacity. It will take some time to complete meaningful new clean rooms and production capacity.” - SK Hynix (000660.KS) CFO Kim Woo-hyun

CPUs are also increasingly in short supply
“Q1 revenue would have been meaningfully higher, but demand continues to outpace our growing supply. Our collective AI-driven businesses now represent 60% of revenue and grew 40% year-over-year..Even as we improve factory output, demand continues to run ahead of supply for all our businesses, especially for Xeon server CPUs, where we expect sustained momentum this year and next.” - Intel (INTC 0.00%↑) CEO Lip-Bu Tan

The ratio of CPUs to GPUs could trend towards parity
“I think the feedback from the customer, CPU is very important when you move from training to inference. Inference side, I think in terms of orchestration, control plane, and also managing all the different agent with data, CPU is much more efficient. So I think the ratio of CPU to GPU used to be 1 and 8, and now it’s 1:4, and I think towards parity or even better. So I think the demand is very strong.” - Intel (INTC 0.00%↑) CEO Lip-Bu Tan

We also have a shortage of electricians
“Circling back to some of the reasons for that, we’re at a point where you’re just seeing incredible demand and competition over the supply chain, labor, and certain parts of the country having shortages of skilled labor electricians. We as an industry are moving at an incredible pace to deliver critical digital infrastructure.” - Digital Realty Trust (DLR 0.00%↑) CEO Andy Power

“ We’re gonna need another half million electricians in this country, and it may be in two years, it may be in five or seven, but the reality is you can’t have more electricity without more electricians. And it means working with organized labor with community colleges across the country to give people the skills so they can fill these jobs.” - Microsoft (MSFT 0.00%↑) President Brad Smith

“Today, we’re announcing the LevelUp Fiber Technician Pathway: a free, four-week training program designed to prepare people to fill fiber technician jobs across the country....The future of the AI revolution depends on a highly skilled US workforce — one that rises to the challenge of building and maintaining the complex systems that power innovation. Meta is proud to invest in technician training to support our ambitious infrastructure goals,” - Meta (META 0.00%↑) Vice Chair Dina Powell McCormick

Tesla’s Optimus production may start in late July/August 2026
“Start of production is -- we’re assuming it’s somewhere around the late July, August time frame. And I mean just to inject some reality into these questions since these questions are not -- whoever did those questions does not fully understand what happens with the production line.” - Tesla (TSLA 0.00%↑) CEO Elon Musk

Healthcare

The biotech environment appears to be improving
“While demand at academic research customers remains muted in the quarter, we saw early signs of momentum building in our order book. We continue to see a gradual improvement in large pharma and biopharma investment. Instrumentation demand at biotech customers remain muted but stable, but we were encouraged to see recovery in the funding environment drive improved funnel activity.” - Danaher (DHR 0.00%↑) CEO Rainer Blair

“And the conditions are actually improving. It’s not a surprise, but you’re seeing biotech environment is improving from a funding perspective.” - Thermo Fisher Scientific (TMO 0.00%↑) CEO Marc Casper

GLP-1 adoption is negatively impacting bariatric surgery volumes
“Da Vinci bariatrics procedures in the U.S. continue to be impacted by the growth in use of GLP-1s and declined approximately 10%” - Intuitive Surgical (ISRG 0.00%↑) CFO Jamie Samath

Industrials and Transport

Industrial demand appears to be rebounding
“Looking at the performance across our end markets in the first quarter, we saw growth in 10 of our 14 end markets we track, which is up from 9 in the fourth quarter of 2025 and 3 in the same period of the prior year.” - Genuine Parts (GPC 0.00%↑) CEO William Stengel

Boeing saw solid backlog growth
“We’re building on our momentum with a strong start to the year and growing record-breaking backlog across our business, while supporting our customers with inspiring missions like Artemis II...With a continued focus on safety and quality, we’re delivering high-quality commercial and defense products and services, while increasing production to uphold our customer commitments and get back to the iconic global aerospace company that leads our industry.” - Boeing (BA 0.00%↑) CEO Kelly Ortberg

Defense spending is up globally
“Countries around the world are recognizing a fundamental shift in the geopolitical environment, leading to global military spending rising approximately 40% over the past decade, and it’s expected to continue to rise as Western nations modernize and grow their forces....Earlier this month, the administration submitted a $1.5 trillion defense budget request for fiscal year 2027. The budget emphasizes modernization and represents a 44% increase over current funding levels.” - Northrop Grumman (NOC 0.00%↑) CEO Kathy Warden

“As seen in the President’s budget request, we expect these priority areas to see significant funding increases in the 2027 U.S. defense budget and other supplemental funding packages.” - RTX (RTX 0.00%↑) CEO Christopher Calio

Even elevator manufacturers can benefit from datacenters
“It’s a very durable elevator that handles a much heavier load. So if you think about a data center and now with all the challenges and communities, they’re not just really huge one-story buildings, they’re two-story. So in a chip factory, if you need to move precious cargo such as rack servers, you need a more robust elevator. You need it more rugged, which means it’s got a heavy-duty frame. It’s got extra cushioning. Think about hospitals as you’re moving patients. It’s just really a new offering we now have brought across the globe, starting in North America, across a wide range of loads, so 6,000 to 20,000 pounds, we can now handle in one of these heavy-duty, rugged elevators and we can connect it to backup generators. So it has to always be available in these kinds of intense, high-demand facilities, and obviously comes with a much higher price point.” - Otis (OTIS 0.00%↑) CEO Judy Marks

Automotive markets are soft, including in China
“In automotive, the market was soft as expected in the first quarter. Global IHS build rates were down about 3% overall and 10% in China, which pressured volumes.” - 3M (MMM 0.00%↑) CEO William Brown

Materials & Energy

Gas prices need to stay high for a while to change driving behavior
“I would say the gas price dynamic really depends on duration. Short to even medium-term increases in gas prices don’t materially change commuting patterns and driving levels. So it does have to be a sustained elevation in gas prices to really impact miles driven. And to be clear, if gas prices stay high for an extended period of time, that puts downward pressure on miles driven and it’s actually a benefit to frequency. That’s the most kind of straightforward dynamic that we could see. But again, gas prices would need to stay high for an extended period of time to drive that.” - The Travelers Companies (TRV 0.00%↑) President of Personal Insurance Michael Klein

Geopolitical risks will remain for a while
“While the duration and full extent of the conflict remain uncertain, it is evident that geopolitical risk has become a structural reality for oil and gas markets. This development has significant consequences for the reliability of supply and global energy security.” - Baker Hughes (BKR 0.00%↑) CEO Lorenzo Simonelli

Countries are more focused on energy security
“I believe the situation in the Middle East will have meaningful and long-lasting implications for the global energy sector. Here’s what I expect. First, energy security is no longer simply a talking point. It demands action by every nation to ensure a reliable supply of oil and gas. I expect we will see increased investment in localized oil and gas developments and urgency to diversify sources of oil and gas for those countries without their own resources.” - Halliburton (HAL 0.00%↑) CEO Jeffrey Miller

Asian countries are switching from natural gas to coal
“In Asia, higher LNG prices have led to fuel switching from natural gas to coal, which has helped moderate additional upward pressure on LNG prices. Meanwhile, in Europe, the gas injection season has begun at a slower pace against relatively low storage levels. Currently, storage levels are only 30% of capacity, 6% below last year and 13% below the seasonal average.” - Baker Hughes (BKR 0.00%↑) CEO Lorenzo Simonelli

It will take several years to rebuild strategic oil reserves
“...recovery of oil and gas production and inventories will not be a quick or simple process. Cumulative production deficits are in the several hundreds of millions of barrels and trending towards 1 billion. This represents several years of meaningful incremental demand to replace strategic reserves on top of what I believe will be continued structural demand growth.” - Halliburton (HAL 0.00%↑) CEO Jeffrey Miller

Meanwhile, electricity demand is surging
“Orders remain strong at roughly 2.5x revenue and increased 86% year-over-year to approximately $7.1 billion due to growing grid equipment demand, partially to support data center development.” - GE Vernova (GEV 0.00%↑) CFO Kenneth Parks

Nuggets of Wisdom

You won’t excel at work you hate
“So I finally practiced law again, but I didn’t really enjoy it. And you can’t ever achieve anything worthwhile in life if you don’t enjoy it. Nobody ever won a Nobel Prize hating what they do. If you love what you’re doing, you’ll probably do well. But if you hate what you’re doing, you’re never going to be great at it. And I didn’t like practicing law, and obviously, my clients didn’t think I was that good at it. So I decided to start Carlyle with no knowledge of how little I really didn’t know about private equity. And most people that start companies start companies with knowing very little about what they’re about to do. Very few. Because you just, if you knew how all the problems in starting a company, you probably wouldn’t start it.” - Carlyle Group (CG 0.00%↑) Chair David Rubenstein

Wealth alone doesn’t create happiness
“The most tortured people I know are some of the wealthiest people in society. They’re tortured souls because they have a lot of money, they have a lot of art and other accoutrements of wealth, but they’re not really happy. The happiest people are people that found a way to do something useful with their life and to help other people. And just think about that when you get your degree, what you’re gonna do that’s useful with your life, not just making more money.” - Carlyle Group (CG 0.00%↑) Chair David Rubenstein

Farewell to Tim Cook
“This is not goodbye. But at this moment of transition, I wanted to take the opportunity to say thank you. Not on behalf of the company, this time, though there is a wellspring of gratitude for you that overflows inside our walls. But simply on behalf of me. Tim. A person who grew up in a rural place in a different time and, for these magical moments, got to be the CEO of the greatest company in the world. Thank you for the confidence and kindness you’ve shown me. Thank you for saying hi to me on the street and in our stores. Thank you for cheering alongside me when we unveiled a new product or service. Thank you, most of all, for believing in me to lead the company that has always put you at the center of our work. Every day we get up and think about what we can do to make your life a little bit better. And every day, you’ve made mine the best I could have asked for.” - Apple (AAPL 0.00%↑) CEO Tim Cook