Big tech adds $500B as AI bets start paying off
Microsoft and Meta deliver blowout results, signaling payoff from massive capital spending.
The world’s leading technology companies added over $500 billion in combined market value late Wednesday, as investors cheered quarterly results from Microsoft and Meta Platforms that showcased accelerating returns on their massive artificial intelligence investments.
In after-hours trading, Microsoft surged 8%, increasing its market capitalization by $288 billion, while Meta jumped 9%, adding $152 billion in value. AI chip leader Nvidia, currently the most valuable company in the world, rose 1%, and Amazon, which is set to report earnings Thursday, climbed more than 2%.
The rally underscores investor enthusiasm for Big Tech’s race to dominate generative AI. After years of record-breaking capital expenditures, Wall Street is finally seeing the financial payoff.
Meta projected third-quarter revenue well above analyst expectations and raised the lower end of its 2024 capital expenditures guidance by $2 billion, now forecasting between $66 billion and $72 billion. CEO Mark Zuckerberg told analysts that AI is already delivering substantial improvements in Meta’s core advertising business, which drives revenue on Facebook and Instagram.
“There are all these questions people have about the timelines to reach really strong AI or superintelligence,” Zuckerberg said on a conference call. “We’ve observed that the more aggressive assumptions have been the most accurate.”
Microsoft, meanwhile, reported a stellar quarter fueled by strong growth in its Azure cloud business, which surpassed $75 billion in annualized sales for the first time, beating expectations of $74.62 billion. The company also issued a record-breaking capital spending forecast of $30 billion for its current fiscal Q1, positioning itself to potentially outspend rivals over the next year.
“I feel very good that the spend we’re making is correlated to contracted, on-the-books business that we need to deliver,” said CFO Amy Hood.
Together with Google’s recent commitment to increased AI infrastructure spending, the results suggest that Big Tech’s $330 billion data center buildout in 2024 is beginning to show measurable returns.
For Meta, the strong results may also ease investor concerns about its aggressive AI investments. Though capital costs, including compensation for high-priced AI talent, are expected to continue rising through 2026, Wednesday’s results suggest those investments are already reshaping the company’s business.
