Märkte Insight: Der fragile Profit-Boom der US-Konzerne

Recent profit surges in US corporations, despite global wars and geopolitical crises, are often attributed to soaring corporate earnings by investment strategists. Nvidia's recent quarter figures have reinforced the notion that the S&P 500 rally this year, up 12 percent so far, is fundamentally sound. On average, US corporations' earnings per share increased by 32 percent in the second quarter compared to the previous year, according to Swiss private bank J. Safra Sarasin analysts.

US corporate profit growth has demonstrated "exceptional strength," but they do not expect this boom to continue unabated. Safra Sarasin has identified three factors that could slow down profit growth: 1) The energy price shock has eased as Iran war and Hormus blockade have heavily impacted Europe's economy, but the US energy sector's profits grew by 150 percent in the second quarter compared to the previous year, contributing to a 30 percent overall profit growth in the US.

However, tanker traffic on the Hormus route is again increasing, and energy prices are expected to fall, reducing the rapid growth of US energy corporations' profits. 2) Rising financing costs – US tech companies are investing extensively in chips, data centers, and infrastructure in response to the AI race. Cash flow is no longer sufficient to fund these investments, so hyperscalers like Amazon, Google, and Meta have increased their debt levels.

Higher debt coupled with rising bond yields means tech corporations will need to allocate an increasingly larger portion of their operating earnings to interest payments, thereby slowing future profit growth, predict Safra Sarasin analysts. 3) Higher depreciation on investments – Safra Sarasin expects that soon, significant write-offs will burden the balance sheets of US tech corporations.

This is due to roughly 60 percent of the hundred billion dollars in tech sector investments this year, mainly in chips, needing to be depreciated within three to five years, compared to other investments that typically have a longer lifespan. "High investment expenses today lead to substantial write-offs tomorrow – a trend that will increasingly manifest in hyperscalers' earnings in upcoming quarters," warn the strategists. Collectively, these factors contribute to a fragile outlook for US corporations' profit growth.