Tech Companies Are Still Spending Heavily on AI. Investors Want to See More Than Big Numbers.

• Meta's Q4 ad revenue grew 24% with 18% more impressions and 6% higher prices, while forecasting 33.5% revenue growth for the current quarter—its fastest rate since 2021—convincing investors that AI investments are paying off
• Microsoft's Azure grew 38% but missed Wall Street expectations, and Microsoft 365 showed only mid-teen growth despite AI Copilot rollout, making its 66% year-over-year capex increase harder to justify
• The five hyperscalers (Microsoft, Meta, Alphabet, Amazon, Oracle) are expected to spend $500-700 billion on AI infrastructure in 2026, fueling growth for hardware companies like Nvidia, Broadcom, and ASML

Summary: Tech AI Spending Under Investor Scrutiny

Key Developments

Meta Platforms and Microsoft reported divergent investor reactions to their Q4 results despite both companies exceeding Wall Street's AI infrastructure spending expectations. Meta's stock surged while Microsoft's declined, highlighting growing investor demand for tangible AI returns rather than just capital expenditure increases.

Company Performance

Meta Platforms: Stock soared after demonstrating strong AI-driven revenue growth alongside heavy spending. Q4 ad revenue grew 24% year-over-year, with 18% increase in impressions and 6% rise in average prices. The company forecasts up to 33.5% revenue growth in the current quarter—its fastest rate since 2021. Bank of America analysts noted "AI is driving returns, and more for Meta than peers."

Microsoft: Stock fell despite beating official estimates. Azure cloud platform grew 38% in constant currency (one percentage point above guidance but below Wall Street expectations). Microsoft 365 revenue growth remained mid-teens, disappointing investors expecting stronger AI Copilot benefits. Capital expenditures jumped 66% year-over-year, though CFO Amy Hood indicated sequential decline expected in the current quarter.

Market Implications

Big Tech "hyperscalers"—Microsoft, Meta, Alphabet, Amazon, and Oracle—are projected to spend $500-700 billion on AI infrastructure in 2026. This spending has driven growth for AI hardware companies including Nvidia, Broadcom, and others. However, analysts emphasize that investors now require clear evidence of earnings impact from AI investments, not just spending announcements.

JPMorgan noted Meta may be "earning the right to invest" in AI infrastructure, while Morgan Stanley cited concerns about Microsoft's "key indicators of GenAI fitness."