Big Tech earnings so far this week have sent a clear warning: investors are willing to overlook soaring spending on artificial intelligence if it fuels strong growth, but are quick to punish companies that fall short.
The contrast was clear in Thursday’s stock market reaction to earnings from Microsoft and Meta, highlighting how dramatically the stakes have changed since the launch of ChatGPT started the AI boom more than three years ago.
Shares of the Instagram parent surged more than 9% on strong sales, while those of Microsoft slumped 10% after its cloud business failed to impress.
“The market appears to be questioning whether these massive capital expenditure hikes will generate sufficient returns,” said Jesse Cohen, senior analyst at Investing.com. “This reflects a growing divide between tech companies’ AI ambitions and Wall Street’s patience for open-ended investment cycles.”
After riding its first-mover advantage with OpenAI to become the world’s most valuable firm in 2024, Microsoft is now under growing investor pressure to justify its soaring capital outlay.
Microsoft reported revenue growth in its Azure cloud-computing business that was only slightly above expectations.
In contrast, AI bolstered ad targeting at Meta, boosting revenue by 24% in the December quarter and aiding a rosy first-quarter forecast. The results show that the Facebook owner’s gains from AI were helping fund its capital spending, which is expected to jump as much as 87% to $135bn this year.
“Meta’s headline numbers are a really interesting reflection of the market’s attitude toward spending in the AI space,” said John Belton, portfolio manager at Gabelli Funds.
“All else equal, the market would typically be concerned, but they have a big revenue guide for the first quarter.”
Microsoft also faced pressure after a disclosure that OpenAI, its prized holding, accounts for 45% of its cloud backlog. Investors are worried that some $280bn could be at risk as the unprofitable startup loses momentum in the AI race.
The ChatGPT creator had issued an internal “code-red” in December after Google’s Gemini 3 launched to positive reviews and is playing catch-up in AI coding to Anthropic’s Claude Code, which has hit an annualized run rate of more than $1bn.
“Microsoft’s deep ties to OpenAI underpin its leadership in enterprise AI, but they also introduce concentration risk,” said Zavier Wong, market analyst at eToro.
Microsoft predicted Azure growth to stay stable in the period from January to March at 37% to 38%, after slowing in the last three months of 2025, partially due to AI chip capacity constraints.
“If I had taken the graphics processing units that just came online in the first quarter and second quarter, and allocated them all to Azure, the KPI (growth) would have been over 40%,” Microsoft finance chief Amy Hood said on a post-earnings call.
She added that the use of chips for internal development efforts had limited the growth.
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