Microsoft plunges, Meta rebounds as investors seek AI rewards

issued Friday, January 30, 2026 · 6:40 a.m.

Big tech’s earnings results so far this week have sent a clear warning. Investors won’t miss out on spending on artificial intelligence if it drives strong growth, but they’ll be quick to punish companies that don’t.

The contrast was stark in Thursday’s market reaction to Microsoft and Meta’s earnings, highlighting how dramatically the stakes have changed since the AI ​​boom began with the launch of ChatGPT more than three years ago.

Microsoft fell 10% due to poor cloud business, losing more than $350 billion in market capitalization, while Meta rose 10%. The former’s $3.2 trillion market valuation is still higher than Meta’s $1.86 trillion, but over the past two years, Meta stock is up 87%, while Microsoft is up just 7%.

Microsoft, which aimed to leverage its first-mover advantage with OpenAI to become the world’s most valuable company in 2024, is now under pressure from investors to justify its soaring capital expenditures.

Microsoft reported slightly better-than-expected revenue growth for its Azure cloud computing business.

In contrast, AI powered meta-targeted advertising, boosting revenue by 24% in the December quarter and supporting a rosy outlook for the first quarter. The results show that profits from AI for Facebook’s owners are helping finance capital spending, which is expected to rise by as much as 87% this year to $135 billion.

“Meta’s headline numbers are a very interesting reflection of the market’s attitude towards spending in AI,” said John Belton, portfolio manager at Gabelli Funds.

“All else being equal, the market would normally be concerned, but they have great earnings guidance in the first quarter.”

Microsoft may have an OpenAI issue

Microsoft also faced pressure after it was revealed that its prized possession, OpenAI, accounted for 45 percent of its cloud backlog. Investors fear that about $280 billion could be at risk if the unprofitable startup loses momentum in the AI ​​race.

ChatGPT’s creators published an internal “Code Red” in December after the well-received launch of Google’s Gemini 3, aiming to catch up in AI coding to Anthropic’s Claude Code, which has an annual execution rate of over $1 billion.

“Microsoft’s deep relationship with OpenAI supports the company’s leadership in enterprise AI, but it also poses concentration risks,” said Xavier Wong, market analyst at eToro.

Microsoft predicted that Azure’s growth rate would slow down in the last three months of 2025 due to AI chip capacity constraints, but would continue to grow steadily at 37% to 38% from January to March.

“If we had allocated all of the graphics processing units that we just brought online in Q1 and Q2 to Azure, our KPI (growth rate) would have been over 40%,” Microsoft Finance Director Amy Hood said on a post-earnings conference call.

He added that using chips for in-house development work is limiting growth.

Meta bets on AI’s compound interest effect

For Meta, the increase in revenue confirmed that its pivot to AI is paying off, helping the company catch up with early leaders.

Revenue rose 24% in the fourth quarter, and Meta expects growth to accelerate by 33% this quarter.

The company has racked up charges from major cloud providers such as Alphabet Inc.’s Google, which bodes well for the search giant’s performance next week. Alphabet stock rose 1.6%.

CEO Mark Zuckerberg said the use of AI “will improve both the organic experience and the quality of ads.”

Mehta expects total expenses to rise 43% this year to US$169 billion, adding: “I think it’s going to have a compounding effect.”

Tesla plans to double spending this year

Rising spending is also a theme at Elon Musk’s Tesla, which is expected to double this year to more than $20 billion as it pivots to AI, humanoid robots and self-driving personal vehicles.

The company also reported better-than-expected quarterly profits and sales, pushing its stock price up 2.9%.

Analysts said the results left a mismatch between companies’ AI goals and investors’ demands for return.

“The market seems to be questioning whether these large increases in capital spending will generate enough returns,” said Jesse Cohen, senior analyst at Investing.com.

“This reflects a widening gulf between tech companies’ AI ambitions and Wall Street’s patience with open-ended investment cycles.” Reuters