Microsoft inventory simply suffered its largest single day drop since 2020. In the meantime, Meta inventory popped by 10%. Each tech giants are spending billions on AI expertise and infrastructure, however traders clearly really feel skittish about Microsoft at first of 2026 and bullish on Meta’s story of near-term upside.
For a corporation that famously whiffed on the metaverse, Meta is trying extra affordable as of late. The corporate continues to be poised to speculate eye-popping sums into synthetic intelligence within the coming years—however so are all of its friends, Microsoft included. In an period of AI hype and sky-high expectations, Meta is following the gang—not main it—for higher or worse.
In 2026, the corporate is constructing a grounded narrative round its sturdy income development. Meta is an promoting firm by way of and thru, and in 2026, it’s emphasizing that core competency whereas pointing to sturdy income development to again up the story. Meta reported $59.89 billion in income within the final quarter, beating Wall Road’s estimate by over $1 billion. The corporate stated extra individuals are utilizing its broad household of social apps, with 7% day by day energetic person development yr over yr throughout its merchandise.
Meta CEO Mark Zuckerberg took a while in Wednesday’s earnings call to declare that he can’t think about a world “the place most glasses that folks put on aren’t AI glasses” inside the subsequent few years. However no less than he didn’t lead with the corporate’s newest cash-burning client {hardware} guess.
Meta’s AI spending inexperienced gentle
The Menlo Park tech big’s funding in AI is barely rising. In 2026, Meta expects to splash out between $115 billion and $135 billion in capital expenditures, method up from the $72.22 billion it spent throughout 2025. Meta says the rise will largely be pushed by upped funding into Meta Superintelligence Labs, its AI division. “We’re on this fascinating interval the place we’ve been rebuilding our AI effort, and we’re six months into that, and I’m proud of the way it’s going,” Zuckerberg stated.
Meta is bullish on its near-future income, too. The corporate is anticipating to usher in between $53.5 and $56.5 billion subsequent quarter. On its earnings name, executives highlighted how weaving AI into its current merchandise is explicitly boosting its advert enterprise.
“There are a number of main enterprise alternatives that we’re targeted on . . . one is simply going to be bettering the core merchandise and accelerating the present enterprise,” Zuckerberg stated, noting that Meta’s merchandise are already benefitting from AI integration into their suggestion engines. The corporate says that advertisers are responding to advert efficiency enhancements already, and people successes are driving conversion development—and income.
Traders took notice, the inventory popped, and the corporate’s narrative about the place all that AI spend will go appears to make sense to the market, no less than for now.
Microsoft’s story is difficult
Traders appear to understand that Meta is consuming its greens and bolstering its advert enterprise as of late, however Microsoft is a special story.
Microsoft, as soon as the boring PC firm, is on the chopping fringe of the AI growth. The corporate handily beat expectations in its personal earnings report this week, notching $81.3 billion in quarterly income—a 16% year-over-year enhance. Its web revenue bested expectations, too. So what went mistaken?
If traders are apprehensive about being over-indexed on Microsoft, Microsoft could also be apprehensive about being in too deep with OpenAI. The tech stalwart’s AI bets are complicated attributable to being certain up with OpenAI, which the bigger firm has invested more than $11 billion into so far. Microsoft’s newest earnings had been buoyed by OpenAI’s transformation right into a extra conventional for-profit firm, wherein Microsoft will personal a 27% stake, valued at $135 billion. That funding delivered Microsoft $7.6 billion in web revenue within the final quarter.
Microsoft more and more competes with its longtime accomplice, however stays worryingly depending on it on the identical time. The corporate is holding onto an astronomical $625 billion backlog in pent-up demand for its cloud computing enterprise, however simply disclosed that OpenAI accounts for 45% of these excellent cloud contracts. If OpenAI stumbles, Microsoft does too.
Microsoft could also be powering the AI revolution, however till solved, its capability woes put an ungainly cap on the income that companies can herald. To repair the issue, the corporate is feeding its voracious urge for food for cloud computing capability—however all of that spending might begin to rattle traders. Microsoft shelled out $37.5 billion in capital expenditures within the final quarter, a determine that features AI infrastructure funding like information facilities. In the meantime, its Azure cloud enterprise grew 39% within the quarter, beating expectations however staying flat from final quarter’s development.
Within the firm’s earnings report, CEO Satya Nadella argued that Microsoft is nicely positioned within the “starting phases” of AI adoption. “We’re pushing the frontier throughout our whole AI stack to drive new worth for our clients and companions,” he stated.
AI’s main gamers are set to sink extra cash than ever into the know-how this yr. However after a number of years of AI-driven sugar highs, the trade might lastly be tempered by traders anticipating an endgame.
