Business · Companies · 1 hr ago
AI spending fears weigh on expected Big Tech earnings
Alphabet, Microsoft and Amazon are due to report earnings this week after a period of strong growth.
Investors expect each company to post a double-digit rise in quarterly revenue.
But the main concern is the cost of AI investment and how soon it will produce significant returns.
Meta’s plans to increase future spending commitments by $125 billion, to $825 billion, helped drive its shares down 6.1% in one day last week.
That reaction has made investors more wary of large AI spending plans, especially as borrowing costs remain high and some companies are using debt to build infrastructure.
The wider backdrop includes rising oil prices, an ongoing war in Iran and US midterm elections next week, adding to market uncertainty.
Investors will judge the companies on spending and returns as they release results and explain their plans.
Alphabet, Microsoft and Amazon are expected to report strong results this week, but investors are focused on their artificial intelligence spending and when it may generate returns.
The three companies are expected to post double-digit percentage increases in quarterly revenue.
Investors’ concerns have been sharpened by the market’s reaction to Meta’s higher planned spending.
Meta shares fell 6.1% on Thursday after the company’s plans for future spending were absorbed by the market.
Rising oil prices, the war in Iran and upcoming US midterm elections add to an uncertain market backdrop.
- Who
- Alphabet, Microsoft and Amazon are expected to report results. Investors are watching their AI spending.
- What
- Strong earnings are expected, but investors are concerned about the cost of AI investment and when it will pay off.
- When
- The companies are expected to report this week.
- Where
- Not stated
- Why
- Investors are assessing whether AI spending will generate significant returns and whether strong growth can continue.
This story does not have two clearly opposing sides.
Meta released its results, and its shares rose in after-hours trading.
Meta shares fell 6.1% as investors absorbed the company’s plans to increase future spending commitments.
Alphabet, Microsoft and Amazon are expected to report results.
- Expected reporters
- Alphabet, Microsoft and Amazon
- Expected revenue growth
- Double-digit percentage increases for each company
- Meta planned increase in future spending commitments
- US$125 billion
- Meta future spending commitments
- US$825 billion
- Meta share move
- Fell 6.1% on Thursday (22)
3 sources
What people are saying
Investors have absolutely no tolerance right now for higher capital expenditures.
The market is applying a discount to megacap growth because it is increasingly less convinced that this growth is sustainable.