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\u201cIn a normal world, these results would be pretty good, but in the backdrop of the scale of spending, with things priced for perfection, you really have to hit your marks,\u201d said Josh Chastant, portfolio manager of public investments at GuideStone Funds, which owns a stake in Microsoft.<\/p>\n
That point was made by Meta Platforms Inc. (META<\/a>), which forecast the fastest quarterly revenue growth in more than four years. Investors responded by sending the stock soaring 10% on Thursday for its best day since July even though the company also said it plans to boost capital expenditures by as much as 87% in 2026. That reality seemed to sink in on Friday as the shares retreated 3% for their worst day since Oct. 30.<\/p>\n The divergence laid bare the increasingly narrow tightrope Big Tech companies are walking three years into a rally built on bets that their deep pockets and aggressive investments will put them at the forefront of the next transformational technology. Investors can stomach massive spending as long as there\u2019s growth to back it up. If not, prepare to be punished.<\/p>\n \u201cWe\u2019re firmly in an era where the monetization of AI capex has to be realized for the valuations of tech stocks to be justified,\u201d said Chastant, whose firm manages about $24 billion.<\/p>\n That lesson will be top of mind for market pros this week with big AI spenders Alphabet Inc. (GOOG<\/a>, GOOGL<\/a>) and Amazon.com Inc. (AMZN<\/a>) set to report earnings on Wednesday and Thursday, respectively. Those two companies along with Microsoft and Meta are expected to spend more than $500 billion combined on capital expenses this year, according to data compiled by Bloomberg, with much of it going to AI computing infrastructure.<\/p>\n Story Continues <\/p>\n Expectations are highest for Alphabet, which has been by far the best performing stock among the Magnificent Seven over the past six months with a gain of more than 70%. That rally has been fueled by the success of Google\u2019s Gemini AI model and excitement about its custom-made AI processors, which are expected to help drive cloud-computing growth.<\/p>\n Alphabet shares closed at a record on Thursday before retreating slightly on Friday. At more than 28 times estimated profits, they\u2019re trading at their most expensive level in almost two decades.<\/p>\n Amazon will be under pressure to keep momentum going after Amazon Web Services, the world\u2019s biggest cloud-computing business, posted the strongest expansion in almost three years last quarter.<\/p>\n \u201cNot all the growth rates are going to be hit,\u201d said Peter Corey, co-founder and chief market strategist at Pave Finance, which oversees $20 billion in client assets. \u201cOver the long-term, expectations could really get hammered.\u201d<\/p>\n Many investors are already starting to pull some of their bets on tech. An index tracking the Magnificent Seven, which also includes Apple Inc. (AAPL<\/a>), Tesla Inc. (TSLA<\/a>) and Nvidia Corp. (NVDA<\/a>), is down 1.5% since closing at a record three months ago, while the S&P 500 is up 0.7% in that time. And the declines have been far more severe elsewhere.<\/p>\n <\/p>\n
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