Investors react negatively to major tech companies' AI investments when these expenditures result in reduced growth rates

Investor Sentiment Shifts on Big Tech Spending

By Aditya Soni and Deborah Mary Sophia

On January 29, Reuters reported that investors sent a clear message to leading technology firms during this week’s earnings season: record-breaking expenditures are acceptable only if they deliver strong growth. This marks a significant change in expectations since the debut of ChatGPT over three years ago.

Meta’s AI-Driven Growth Impresses

Meta Platforms, the parent company of Facebook, saw its revenue jump by 24% in the last quarter of the year, thanks to enhanced online advertising powered by artificial intelligence.

The company also issued a first-quarter revenue outlook that surpassed analyst predictions, indicating that Meta’s robust sales could support a dramatic increase in data center investments—potentially rising by as much as 87% this year to reach $135 billion.

John Belton, a portfolio manager at Gabelli Funds, commented, “Meta’s headline results offer a fascinating glimpse into how the market now views spending in the AI sector.” He added, “Normally, such high spending would be a concern, but Meta’s strong revenue guidance for the upcoming quarter has reassured investors.”

Microsoft Faces Investor Scrutiny

Microsoft reported only modest growth in its Azure cloud division, which barely exceeded expectations and fell short compared to its record quarterly investments.

Concerns arose when it was revealed that OpenAI—a key Microsoft partner—accounts for 45% of Azure’s backlog, putting roughly $280 billion at risk as the unprofitable startup loses ground in the AI competition.

Zavier Wong, a market analyst at eToro, noted, “Microsoft’s close relationship with OpenAI strengthens its position in enterprise AI, but it also creates a concentration risk.”

OpenAI, the creator of ChatGPT, reportedly declared a “code-red” internally in December after Google’s Gemini 3 received positive feedback. Meanwhile, Anthropic’s Claude Code has surged ahead, reaching an annualized revenue run rate exceeding $1 billion.

Following these developments, Microsoft’s shares dropped 6.5% in after-hours trading on Wednesday, while Meta’s stock soared by 10%.

Having leveraged its early partnership with OpenAI to become the world’s most valuable company in 2024, Microsoft now faces mounting pressure from investors to justify its escalating capital expenditures.

The company expects Azure’s growth to remain steady from January to March, after a slowdown in the final quarter of 2025, which it partly attributed to limited availability of AI chips.

Microsoft’s CFO Amy Hood explained in a post-earnings call, “If we had allocated all newly available graphics processing units to Azure in the first and second quarters, growth would have exceeded 40%.” She added that using chips for internal development had constrained Azure’s expansion.

Meta’s Ambitious AI Investments

Meta’s recent quarter highlighted the rewards of its aggressive entry into the AI field, including a fierce competition for talent and a commitment to invest hundreds of billions in new data centers to pursue “superintelligence.”

The company’s revenue climbed 24% in the fourth quarter, and Meta anticipates growth could accelerate up to 33% in the current quarter.

However, Meta is incurring significant costs at major cloud providers like Alphabet’s Google, which could positively impact Google’s upcoming results.

CEO Mark Zuckerberg stated that AI will enhance both user experience and advertising quality. He has also pledged that achieving superintelligence—a point where machines surpass human intelligence—will enable Meta to deliver highly personalized AI to its vast social media audience.

“I believe this will create a compounding effect,” Zuckerberg said, as Meta projected a 43% increase in total expenses this year, reaching $169 billion.

Tesla’s Doubling Investment in AI and Automation

Elon Musk’s Tesla is also ramping up its spending, planning to double its investments this year to over $20 billion as it shifts focus toward AI, humanoid robots, and self-driving vehicles.

After announcing these record spending plans, Tesla’s shares gave back some gains, following a 3.5% rise on better-than-expected quarterly profit and revenue.

Analysts observed that these results highlight a disconnect between tech companies’ ambitious AI strategies and investors’ expectations for tangible returns.

Jesse Cohen, a senior analyst at Investing.com, remarked, “The market is questioning whether these massive increases in capital expenditures will actually deliver sufficient returns.” He added, “This underscores a widening gap between technology firms’ AI aspirations and Wall Street’s willingness to wait for payoffs.”

Reporting by Aditya Soni, Deborah Sophia, and Jaspreet Singh in Bengaluru; Edited by Clarence Fernandez