Investor skepticism toward artificial intelligence spending became clearer in the latest round of Big Tech earnings, as post-results stock reactions diverged sharply across the sector. Meta fell as much as 8% after hours after issuing a disappointing quarterly revenue outlook and posting its lowest free cash flow in years, a result the market read as a sign that heavy AI bets are driving costs higher. Microsoft moved the other way, closing up nearly 16% after reporting its fastest cloud growth in four years and signaling that it would rein in new capital expenditure this year. The rally added $450 billion to its market value in a single session, setting a record for one-day gains by an individual stock. Amazon also rose 15% after earnings, helped by upbeat cloud revenue and the fastest growth in that business in four years, which eased concerns over returns on massive AI outlays. Bob Lang, founder and chief options strategist at Explosive Options, said investors were bound to grow tired of endless spending by hyperscalers, making the positive reaction to tighter spending discipline unsurprising.
Investor doubt around AI spending showed up clearly in the market reaction to this season’s Big Tech earnings.
Post-earnings trading split the group in two. Meta fell as much as 8% after hours after issuing a disappointing quarterly revenue outlook and reporting its lowest free cash flow in years. The move was taken as a sign that its AI push is driving a sharp rise in expenses.
Microsoft went the other direction. Its shares closed up nearly 16%, adding $450 billion in market value in a single day, a record one-day gain for an individual stock. The catalysts were its fastest cloud business growth in four years and management’s signal that it would control new capital expenditure this year.
Amazon also climbed 15% after earnings. The company reported upbeat cloud revenue, and growth in that segment reached a four-year high, helping ease investor concern about returns on large AI-related spending.
Bob Lang, founder and chief options strategist at Explosive Options, said investors would eventually get tired of endless spending by hyperscalers, so it was not surprising to see a company rewarded for showing spending restraint.
The report added that stocks tied to the global AI supply chain, along with companies that support AI or use the technology, also appear to be back in favor.
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