Microsoft shares rose 15.2 percent on Thursday after the company reported quarterly results that beat Wall Street estimates, driven by Azure cloud revenue growing at its fastest pace in four years. Chief executive Satya Nadella said the performance reflects customers using Microsoft platforms to move into artificial intelligence. The move coincided with a broader tech rally that lifted the Nasdaq 100 2.1 percent a day after the index entered a technical correction, while the S&P 500 added 0.9 percent and the Dow Jones Industrial Average gained 0.6 percent as of 9:31 am New York time.
Meta shares fell 9 percent after the Facebook, WhatsApp and Instagram parent missed profit targets and reported $42 billion in costs and expenses, up 55 percent from the same period a year earlier. The company also raised the lower end of its forecasted range for capital spending this year. Investors focused on the lowest free cash flow in the current earnings report and a projected $145 billion directed toward AI data centres and smart glasses.
The divergence underscores a widening debate over whether massive AI infrastructure spending will generate near-term returns. US big technology companies are eyeing as much as $725 billion in capital expenditure this year, mainly for data centres. Alphabet has estimated $205 billion in AI capex for the year, while Microsoft said it intends to spend $175 billion in its current fiscal year.
Some analysts pointed to Meta's increased spending forecast as a catalyst for the selloff, noting investor concern over profits from the massive investment in AI. The mega-cap group has dragged the broader market this year amid rising scrutiny of multi-billion-dollar AI outlays. Market participants now await results from Apple and Amazon for further indication on how the Magnificent Seven are set to perform.
"Despite near-term volatility, the outlook for US equities remains constructive, supported by strong corporate earnings, ongoing AI adoption, a resilient economy, and favorable financial conditions," said Sameer Samana at Wells Fargo Investment Institute. A separate Bloomberg report noted investors are growing agitated over extravagant AI expenditure by tech companies amid fears over whether the bets will pay off.