U.S. stocks concluded April on a strong note, with corporate earnings and the appeal of artificial intelligence narratives overshadowing concerns over war, inflation, and interest rates. On Thursday, the S&P 500 rose 1% to a record high, capping a monthly gain of 10%—the best performance since November 2020.
Robust earnings reports from Alphabet and Caterpillar served as key market drivers. Alphabet's stock surged nearly 10%, marking the largest single-day market cap increase in the company's history and the second-largest single-day gain ever recorded by a U.S. corporation. Caterpillar, benefiting from surging demand driven by AI data centers, saw its shares climb 9% to an all-time closing high.
According to Ray Baraldi, CEO of 2/13 Strategic Partners, the market has been testing the gap between AI enthusiasm and tangible results. Initial excitement about AI's potential is now being followed by rigorous scrutiny—investors ultimately require concrete evidence of returns.
Alphabet's quarterly performance was heavily concentrated in its Google Cloud division. Cloud revenue grew 63% year-over-year to $20 billion, with an operating profit margin of 33%, significantly exceeding market expectations. More notably, Google Cloud's order backlog nearly doubled from the previous quarter to $46.2 billion, largely driven by AI demand and sales of Tensor Processing Unit (TPU) chips. The company raised its full-year capital expenditure guidance from $175–$185 billion to $180–$190 billion, indicating that spending would "increase substantially" by 2027.
Jake Behan, Head of Capital Markets at Direxion, noted that Alphabet's investments are being validated by its $460 billion order backlog. CFO Anat Ashkenazi stated during an earnings call that internal and external demand for AI computing resources is "at unprecedented levels." CEO Sundar Pichai added that cloud revenue could have been even higher if the company had been able to meet all demand. Pichai emphasized that Alphabet's AI investments and full-stack strategy are "illuminating every corner of the business."
The advertising segment also remained solid. Search ad revenue rose 19% year-over-year to $60.4 billion, YouTube ad revenue increased 11% to nearly $10 billion, and revenue from subscriptions, platforms, and devices grew 19% to $12.4 billion. As of Thursday's close, Alphabet's market capitalization reached $4.65 trillion, making it the second-largest among the "Magnificent Seven" tech giants, trailing only NVIDIA.
Caterpillar’s strong performance offered another narrative of AI-driven profitability. The company reported a 22% year-over-year increase in quarterly revenue to $17.4 billion, well above the $16.4 billion expected by S&P Capital IQ. Construction industry revenue grew 38%, while the energy and transportation segment rose 22%. CEO Joe Creed noted that much of the growth in the energy and transportation division stemmed from the data center construction boom and the power demands of cloud computing and generative AI. Caterpillar’s engines and turbines provide primary and backup power, as well as electrical infrastructure, for these facilities.
Order backlog data was particularly telling. Creed stated that the company’s current backlog reached $63 billion, up 79% from a year earlier, with some orders extending through 2028. He announced that expansion plans would be launched "immediately." Caterpillar is the second-largest component of the Dow Jones Industrial Average, accounting for over 10% of the index. Its 10% single-day gain on Thursday contributed 790 points to the Dow’s advance.
According to Bloomberg, Bank of America analyst Michael Feniger wrote in a research note that while tensions in the Middle East pose short-term risks for Caterpillar, a potential wave of new energy infrastructure projects could "provide growth opportunities by 2027."
Despite escalating geopolitical risks in April, equity markets appeared largely indifferent. Former President Donald Trump is expected to receive briefings on new military options regarding Iran, which initially pushed crude prices higher, though they later retreated. U.S. crude futures ended the day near $105 per barrel.
David Waddell, Chief Investment Strategist at Waddell and Associates, suggested that Iran appears unwilling to negotiate, and Trump may "overturn the table." On the macroeconomic front, the Federal Reserve’s preferred inflation gauge indicated further price pressures in March, partly due to rising energy costs. First-quarter GDP growth came in at 2%, below economists' expectations, while consumer spending showed signs of slowing. The 10-year U.S. Treasury yield ended at 4.389%.
Waddell noted that markets often test new Fed chairs but expects at least one symbolic rate cut by year-end. He concluded that tailwinds from the global industrial construction boom are "strong enough to outweigh the challenge of absorbing higher energy costs," adding that the strength of this rally has been "surprising."