Back Research Notes Q2 Earnings Surprise + GPT-5 Release: The Next Industrial Revolution Is Here Published on August 10, 2025 By Jordi Visser Summary This week’s video focuses on a blockbuster Q2 earnings season and the massive structural shifts being driven by AI, culminating in the launch of GPT-5. Despite tariffs, capex worries and heightened uncertainty earlier in the year, earnings easily beat expectations, S&P 500 earnings growth is running at ~11.9% vs. ~4.9% forecast, with 81% of companies beating revenue estimates. Industrials like Caterpillar, Parker Hannifin, Siemens, and Cummins report record backlogs and surging demand tied to AI, data centers, and power generation. Aggregate payrolls remain strong, leading indicators like regional PMI new orders and earnings revisions are trending higher, and retail spending momentum is holding firm, even as sentiment shows investors remain tilted to the bearish side. Net: AI-driven infrastructure spending is offsetting weakness in housing, CRE, and transportations, while many macro investors and strategists still underestimate this shift. On tech, GPT-5 looks like a watershed for software creation, letting non-coders build enterprise-grade tools in minutes. That threatens legacy software and middleware models (e.g., Salesforce, SAP, Oracle) as AI agents arrive now, robo-taxis follow, and humanoids come later, an economic impact akin to the industrial + internet + electrification waves combined. Eric Schmidt and Elon Musk both underscore collapsing coding barriers and a post-app, post-OS future. With AI accelerating, crypto adoption gaining policy tailwinds, and power demand set to surge, markets are entering rapid, AI-led disruption that traditional GDP measures won’t fully capture. Timestamps (00:00 – 02:54) Strong Q2 earnings across the board despite tariffs and uncertainty; S&P 500 up 2.5% for the week and near all-time highs. Revenue beats (81% of companies) tied to nominal GDP; best quarter since Q2 2021. Earnings growth at 11.9% vs. 4.9% expected. (04:04 – 09:21) Industrial companies like Caterpillar, Parker Hannifin, Cummins, Siemens, Arista, and Bloom Energy report record backlogs and unprecedented AI/data center-driven demand. Power generation sales are booming; electricity buildout phase beginning. AI and infrastructure investment offset weakness in housing, CRE, and autos. (10:46 – 14:30) Capex and uncertainty trends reversing, sales revisions and PMI indicators point higher. Chicago PMI sees 9th largest new orders increase on record; retail spending and Visa momentum strong. Employment tax receipts healthy; bearish sentiment high despite strong data. (17:02 – 20:57) Labor market concerns overstated, aggregate payrolls (jobs × hours × wages) a better measure than headline NFP. Aggregate payrolls growth remains solid, supporting spending and nominal GDP. Cleveland Fed rent index drop could impact CPI’s owners’ equivalent rent. (20:57 – 24:26) GDP fails to fully capture AI-driven productivity and profit margin gains, concentrated in the “Magnificent 8” companies. Non-Mag 8 firms show flat profit margins; net worth/GDP ratio up sharply since ChatGPT launch, concentrated among top 20%. (26:53 – 30:22) Early AI agent adoption will cut information work costs, boost productivity, and roll out in phases, AI agents now, robo-taxis next, humanoids later. This could mirror the combined impact of industrial, internet, and electrification revolutions within decades. (30:49 – 37:27) GPT-5 release seen as a major inflection: capable of generating software on demand, threatening legacy software models and operating systems. Eric Schmidt and Elon Musk note collapse of coding barriers, enabling non-programmers to build apps, disrupting firms like Salesforce, SAP, Oracle. (38:09 – 39:09) Trend emerging: long energy, short software, energy demand from AI surging while software margins face disruption. Example: Chevron vs. Salesforce performance turning in energy’s favor. (39:09 – 41:20) Bitcoin and Ethereum breaking higher; Trump EO allows crypto in 401(k)s and private equity. Three Fed rate cuts expected by year-end; possible surprise if long rates don’t rise immediately after cuts. China slow on stablecoins; Bolivia’s inflation driving crypto adoption. (41:20 – 41:35) Macro analysts still underestimating AI’s impact by using outdated GDP measures; AI-driven shifts in productivity, earnings concentration, and capital flows mark a structural economic change. Watch here