Form 10-K(AI)

To my surprise, even before ChatGPT went public, a third of S&P 500 companies were already mentioning AI in their annual reports. Less surprising: four years later, nearly all of them do, from software makers to soda makers.

I sorted every AI mention into one of two moods. Hopeful: selling AI, using it, or investing in it. Worried: its risks, like competition, regulation and security. As more companies talked about AI, the tone flipped. In 2022 filings, over three-quarters of AI mentions were hopeful, about how AI could transform the business. By 2026, about two-thirds were worried about the harm it could do. That's an astonishing change of tone in just four years.

All but two sectors turned worried

In 2022 filings, 8 of the 9 sectors with enough AI talk to count sounded more hopeful than worried. By 2024, only Software and Semis did, and they still do. Elsewhere, hope stayed around one mention per 10,000 words or less while worry kept climbing.

Copy, paste, worry

AI worry comes in three kinds: legal and reputational risk (49% of worried mentions), security (30%) and competition (21%). For each one, companies reached for boilerplate: these sentences appear in the same words in different companies' annual reports.

Talk is cheap. If companies believed their own AI talk, they'd spend on it: data centers, chips, servers. The closest public number is capex, what a company spends on buildings and equipment. No company reports its AI spending separately, so capex is a signal, not a measure.

Here is capex as a share of revenue, year by year, in the five sectors where capex is indicative of AI spending. Software's share climbs from 7.2% to 24%, but void its two biggest spenders and the rest of the sector went from 2.5% to 1.7%. Semis spent a smaller share. Utilities spent more across the board, and they barely talk about AI.

Did the hopeful spend more?

Mostly not. Each receipt lists a sector's five biggest and five smallest spenders in fiscal 2025, the latest year every company has reported. Circled names are the sector's five loudest hopeful AI talkers. In Semis, 3 of them (Nvidia, Qualcomm and Broadcom) are among the five smallest spenders as a share of revenue. Only in Comm services do the loud and the big spenders overlap: Lumen Technologies, Meta, Alphabet and AT&T.

The grand total

The ten biggest capex spenders of fiscal 2025, in any sector except Financials (for banks and insurers, capex isn't a meaningful measure). Six of them are building for AI: $481B together, against $93B for the other 4, which are oil, stores and phones. Apple (#14) and Intel (#11) just miss it. Major chip companies that benefit from the AI boom are surprisingly missing from the top 10: Nvidia ranks #32, AMD #152 and Broadcom #201.

Time for the ultimate question. There are many ways to measure a company's financial performance, but to keep it simple, I use stock returns: what $100 in a company's stock became, dividends included. First, your turn: six annual reports, six calls.

The AI talk index

Now as a strategy. Every April 1, when most annual reports are fresh, read each company's latest report and buy the ones with more hopeful AI talk than their sector's middle company. Hold a year, then rebalance with the new reports. How does it compare with investing in the quiet companies (those with less hopeful AI talk), and in the S&P 500?

The hopeful talkers ended at $166, the quiet companies at $157. Simply buying the S&P 500 beat both: $194.

Same index, sector by sector

Same rule, one sector at a time, sorted by how far the talkers' $100 ended ahead of the quiet companies'. In Semis and Comm services, the talkers ended far ahead (+128% and +94%), led by Micron and Nvidia in Semis and by Alphabet and Meta in Comm services. Only Comm services' talkers were ahead every single year. In five sectors, they fell behind.

The verdict, in short

So does all the AI talk pay off? Not by itself. In a few sectors, the companies that talked up AI did much better than their quiet peers. In others, they did worse, and across the whole market it was a wash. AI talk alone isn't a stock tip.

Every company in the study has a file: how much it talked about AI each year, what it said in its latest report, what it spent, and what $100 in its stock did since ChatGPT launched.