Big Tech Earnings Reveal Cracks in Case for Massive AI Spending

Group 1 - The central theme of the week was artificial intelligence, with significant interest from investors despite the Federal Reserve cutting interest rates and numerous earnings reports from US companies [1][2] - Major US technology companies are investing billions into AI infrastructure, which has positively influenced investor sentiment and contributed to the rise of the S&P 500 Index and Nasdaq 100, nearing record highs [2] - There is a noticeable shift in investor sentiment, with a focus on immediate returns from AI investments, leading to negative reactions for companies like Meta Platforms and Microsoft when their spending did not yield expected results [3][4] Group 2 - Investors are increasingly prioritizing revenue growth over mere AI spending, as demonstrated by the contrasting market reactions to earnings reports from major tech firms [5] - Alphabet reported that its third-quarter revenue from generative AI products more than tripled year-over-year, with Google Cloud sales increasing by approximately 34% to $15.2 billion, surpassing analyst expectations [6] - Amazon also reassured investors with strong cloud growth and outlined expectations that its AI-related initiatives, such as a shopping chatbot, could generate an additional $10 billion in annual sales [6]