🥛 The AI boom has a silent king 👑

GM. This is Milk Road AI, the only newsletter that watches markets like a scoreboard.

Here’s what we’ve got for you today:

✍️ The AI arms race missed the real weapon.
🎙️ The Milk Road AI Show: The Economic Singularity Will Make Today’s Economy Unrecognizable w/ Dr. Alexander Wissner-Gross.
🍪 Elon Musk is taking AI to orbit.

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Prices as of 10:00 a.m. ET.

WHILE AI FIGHTS FOR BRAINS, APPLE CONTROLS POWER

In Game of Thrones, Petyr Baelish famously tells Cersei Lannister that "Knowledge is power.”

Cersei signals her guards to seize him, holds a knife to his throat, and whispers back:

"Power is power."

Source: Tenor

For the last two years, the entire tech world has been screaming about "Knowledge".

Google, Meta, and OpenAI have been in a loud, expensive shouting match about who has the smartest AI model.

They are burning hundreds of billions on GPUs to build the biggest brain.

Meanwhile, Apple has been watching the AI wars like a trainer watching you lift with your back (they know it’s going to end in tears).

Critics called them late. Analysts called them boring.

But in Q1 2026, Tim Cook just reminded the world that while everyone else is fighting for knowledge, Apple still holds the power.

They control the screen you are looking at right now.

And they just delivered a financial beatdown that makes the rest of the industry look like a lemonade stand.

The iron bank opens its vault

Let’s look at the numbers from Q1 2026, because they are frankly offensive to the laws of large numbers.

Revenue hit $143.8B for the quarter - up 16% year-over-year.

Source: Fiscal(.)ai

That breaks down to roughly $1.1M every single minute.

By the time you finish reading this sentence, Tim Cook has already made enough money to buy your entire neighborhood.

But the revenue isn't the scary part. It’s the efficiency.

Net income hit $42.1B.

They are converting nearly 30 cents of every dollar directly into pure profit.

And while the rest of the industry is seeing margins compress due to AI spending, Apple’s gross margins expanded to 48.2%.

Source: Fiscal(.)ai

How? By turning green bubbles into a social disease and charging you a premium to avoid them.

(Fine, I’ll tell you the rest, but only if you promise you aren't reading this on a Pixel.)

The “miracle” in China (or is it?)

For the last three years, the media has been leaving Apple for dead in Asia.

They told us Huawei was the new heavyweight champion in China.

Well, the scoreboard says otherwise.

Apple’s revenue in Greater China exploded 38% YoY to hit $25.5B.

Source: Sherwood

This marks Apple’s first quarter topping $25B in China in four years.

Tim Cook called it the "best iPhone quarter in history in Greater China", and the numbers back him up.

But here is the massive irony that nobody saw coming:

The U.S. actually missed expectations.

You read that right.

While Chinese consumers who were supposedly "banning" Western tech bought 38% more iPhones, Americans on Apple's home turf kept their wallets closed, missing estimates by ~$320M.

According to Counterpoint Research, iPhones accounted for more than 1 in 5 (22%) smartphone shipments in China.

That is a 28% jump from last year.

Source: Bloomberg

Analysts were dead certain that Huawei was going to eat Apple's lunch.

Turns out, Apple just showed up, ate the lunch, and stuck Huawei with the bill.

But as every economist knows: there is no such thing as a free lunch.

While the iPhone was feasting in China, a massive $11B bill was quietly piling up in the supply chain and it’s about to come due.

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WHILE AI FIGHTS FOR BRAINS, APPLE CONTROLS POWER (P2)

While everyone was distracted by the China comeback, a very specific, very expensive line item jumped off the page in the income statement.

Research & Development spending surged 32% to hit $10.9B, significantly higher than in other quarters.

Source: Fiscal(.)ai

Just a friendly reminder: Apple reportedly spent about $10B on the failed Apple car project over an entire decade.

Source: CBT News

Let’s just pray that this time, that mountain of cash buys us something more than a phantom vehicle that never leaves the parking lot.

We all know the only thing the Apple Car ever successfully drove was its engineers to therapy.

Usually, Apple runs a tight ship. So why the sudden extra spending spree?

Because Tim Cook knows the truth: He is behind.

If you need any more proof of Apple feeling the heat, look no further than the deal they just signed with their biggest rival.

In a move that would have been unthinkable three years ago, Apple announced a multi-year partnership with Google.

The deal will see Google's Gemini models power the next generation of Siri and Apple Intelligence features.

Tim Cook called it a “collaboration" to unlock new experiences, but let’s be real: this is a lifeline.

Apple realized their own foundation models weren't ready for prime time, so they went out and rented the best brain they could find.

The new Gemini-powered Siri is rumored to arrive in beta as early as February 2026, promising to finally fix the "I found this on the web" problem.

It’s a smart play: let Google spend the billions on training the models, while Apple controls the user interface and takes the credit.

Why the stock spiked & died

When the earnings dropped, the stock spiked like a sugar rush, but then it faded just as fast.

Why? Two words: RAM prices (the short-term memory that lets your phone run multiple apps at once).

We all knew memory prices were rising, Tim Cook warned us last quarter, but nobody expected the bill to be this high.

The report confirmed that RAM prices have nearly tripled in recent weeks due to AI server demand.

Investors realized that while Q1 was great, Q2 is going to be painfully expensive.

Apple needs massive amounts of memory to run these new local AI models on the iPhone 17.

But buying memory chips right now is like buying a beer at a stadium, the price is extortionate, but you have no other choice.

This explains why cash on hand ($45.3B) actually missed estimates ($49.7B).

They are burning through their savings to hoard chips before the price goes up again.

Why I remain bullish

Despite the missed U.S. sales and the terrifying spike in memory prices, I’m not selling.

In fact, here is the contrarian truth: Apple is the best hedge if you think there is an AI Bubble.

If you are terrified that the AI hype is about to burst, Apple is your safety valve.

When the market panics and dumps the rest of the Mag 7, Apple consistently holds its ground.

It acts less like a volatile tech stock and more like a fortress.

Beyond the safety, I see two massive green lights that the bears are ignoring:

First, while everyone obsesses over hardware sales, Apple Services is quietly becoming the best business in all of big tech.

We are talking about $113B in trailing 12-month revenue and a staggering $86B in gross profit.

Source: @fiscal_ai

This recurring revenue acts as an "infinite money" safety net that protects the downside, even if hardware has a bad quarter.

Second, there is a perspective nobody is talking about: the average iPhone is getting ancient.

Analysts estimate that hundreds of millions of users are still holding onto an iPhone 12 or older.

They can't hold on forever. Batteries die, screens crack, and apps get slow.

When those users finally break and upgrade, likely for the new AI features, the flood of demand will be violent.

Hence, why I’m staying long and buying.

The rest of the industry is currently acting a lot like Littlefinger, spending billions to prove they possess the ultimate "knowledge".

But they are forgetting how that scene actually ends.

It doesn't matter how smart you are if you don't command the loyalty of the guards.

Tim Cook controls the screen, the App Store, and the customer relationship.

And unlike Cersei, Tim Cook doesn't even need a guard. He just needs to threaten to turn your blue bubbles green.

While everyone else is busy whispering secrets, Apple is the one holding the knife to the throat of the entire ecosystem.

Alright, that’s it for this edition of Milk Road AI. We want to hear from you.

Reply to this email with your vote:

So, are you buying Apple here?

Yes (Power is Power): The supercycle is inevitable.
No (Boring is Bad): It’s a bank trading at 30x earnings.
Pass (Sketchy): I don't trust those China numbers.

THE ECONOMIC SINGULARITY IS HERE 🤯

In today’s episode, we sat down with Dr. Alex Wissner-Gross to talk about how collapsing costs for intelligence, energy, and labor could push the global economy into an economic singularity.

Here’s what you’ll hear:

Why Alex believes AGI arrived in 2020 and what that means for future progress.
How robotics could carry AI-driven deflation into the physical world.
The real risk of over regulation slowing deployment and stalling growth.
How AI agents and crypto could form parallel economies that decouple from human incentives.

Don’t sleep on this one 👇