Investors punish Big Tech AI spending that delivers slower growth

Core Viewpoint - Investors are increasingly cautious about Big Tech's AI spending, expecting substantial growth in return for record investments, particularly following the launch of ChatGPT over three years ago [1]. Group 1: Company Performance - Meta Platforms reported a 24% revenue increase in the December quarter, driven by enhanced online ad targeting through AI, and forecasts a further 33% growth in the current quarter [2][10]. - Microsoft experienced only slight growth in its Azure cloud-computing business, which fell short of expectations despite record spending [3]. - Tesla plans to double its capital expenditure to over $20 billion this year, focusing on AI and autonomous vehicles, although this raised concerns about the alignment of corporate AI ambitions with investor expectations [12][13]. Group 2: Investor Sentiment - Investors reacted negatively to Microsoft’s earnings, leading to a 6.5% drop in its shares, while Meta's shares surged by 10% due to its strong revenue guidance [6]. - The market is increasingly questioning whether the significant capital expenditures by tech companies will yield adequate returns, reflecting a growing divide between AI ambitions and Wall Street's patience [13][14]. Group 3: AI Investment and Risks - Microsoft disclosed that its investment in OpenAI accounts for 45% of its backlog, raising concerns about concentration risk as the startup faces challenges in maintaining momentum in the AI race [4]. - Meta's aggressive investment strategy in AI and data centers is expected to lead to a 43% increase in total expenses this year, reaching $169 billion [10][11].