Big Tech results show investor demand for payoffs from heavy AI spending

Core Insights - The earnings reports from major tech companies indicate that investors are willing to overlook high spending on artificial intelligence (AI) if it leads to strong growth, but they are quick to react negatively if companies do not meet expectations [1][2] Group 1: Company Performance - Meta's shares increased by over 9% due to strong sales, while Microsoft's shares fell by 10% after disappointing results from its cloud business [2] - Microsoft reported revenue growth in its Azure cloud-computing business that was only slightly above expectations, with a forecast of stable growth between 37% to 38% for the upcoming quarter [3][6] - Meta's revenue grew by 24% in the December quarter, with a forecast of accelerating growth up to 33% in the current quarter, indicating that its AI investments are yielding positive results [3][7] Group 2: Investment and Spending Trends - Meta's capital spending is expected to increase by as much as 87% to $135 billion this year, reflecting confidence in its AI strategy [3] - Microsoft is under pressure to justify its significant capital expenditures, which have raised concerns among investors about the potential returns [2][4] - Meta's CEO, Mark Zuckerberg, stated that AI will enhance both the quality of organic experiences and advertising, predicting a 43% increase in total expenses to $169 billion this year [8] Group 3: Market Sentiment and Risks - There is a growing divide between tech companies' AI ambitions and Wall Street's patience for long-term investment cycles, as seen in the contrasting stock market reactions to Microsoft and Meta [2][4] - Microsoft faces concentration risk due to its deep ties with OpenAI, which accounts for 45% of its cloud backlog, raising concerns about the sustainability of its growth [4][5] - Analysts noted a mismatch between corporate AI goals and investors' expectations for immediate payoffs, as evidenced by mixed results across the sector [9]