Meta and Microsoft just delivered a masterclass in how Wall Street judges AI investments - and the results couldn't be more different. Meta's stock jumped 8% after the company announced it'll nearly double AI spending to as much as $135 billion this year, while Microsoft plummeted 11% as Azure cloud growth decelerated and capacity constraints raised red flags. The divergence marks a critical moment in tech's AI gold rush, where investors are done accepting promises and now demand proof that massive capital outlays are actually paying off.
Wall Street just drew a line in the sand on AI spending - and it's all about returns. Meta got the green light to pour up to $135 billion into artificial intelligence this year, sending shares soaring 8% in a vote of confidence that would've been unthinkable just quarters ago. Meanwhile, Microsoft watched $140 billion in market value evaporate as investors punished the software giant's 11% stock plunge, spooked by slowing cloud growth and seemingly endless capacity constraints.
The contrast is stark. Meta's nearly doubling its AI budget from 2025 levels, yet investors are cheering because the company delivered 24% year-over-year revenue growth to back it up. The social media powerhouse proved AI isn't just a cost center - it's actively boosting the bottom line through smarter ad targeting and engagement algorithms. CEO Mark Zuckerberg told investors the spending spree will support his mission of "building personal super intelligence," signaling Meta's ambitions stretch far beyond better Instagram recommendations.
But Microsoft's stumble reveals the market's growing impatience with the "spend now, profit later" playbook. Azure cloud revenue growth decelerated to 39% from 40% in the previous quarter - a marginal slip that might've been overlooked in any other context. Not this time. With capital expenditures and finance leases rocketing 66% to $37.5 billion in the quarter (smashing the $34.31 billion analyst consensus from Visible Alpha), investors wanted to see acceleration, not deceleration.
