Payden & Rygel: Q2 was a (US) profit boom
Al-related capital expenditures continue to power U.S. growth and trade. Skeptical colleagues wondered whether revenues would ever justify the spend.
As if on cue, this week's Q2 U.S. GDP update showed that pre-tax corporate profitsadjusted for inventory valuation and capital consumption tallied $4.83 trillion in the second quarter, up 22.8%, or almost $900billion, from a year earlier.
Corporate profits now account for 14.9% of nominal GDP, the highest share in datadating back to 1947, meaning that, in profitability terms, the current era outshines every 'golden age' you've heard of since WorldWar II.
We'll get more industry-level details later, but we can guess where the growth is coming from. Nvidia reported quarterly revenue of $96.2billion this week, up 106% from a year ago, with over 90% of revenue coming from its data centersegment.
In addition, the top three hyperscalers' cloud revenue growth rates are running at their fastest clip since 2021, with a swelling backlog, meaning demand keeps outpacing supply. With revenues up, analysts now expect even morecapex in 2027. Of course, skeptics will say one more quarter of good profit doesn't mean it will continue. Still, far from a bust, Q2 was a profit boom.
