Tech giants increase AI investments with mixed reactions from the market
Microsoft and Meta are leading the way, while Apple and Amazon are facing uncertainty.
Recent earnings reports from major tech companies such as Microsoft, Meta, Apple, and Amazon highlight a notable increase in capital expenditures (CapEx), primarily driven by substantial investments in artificial intelligence infrastructure. However, traders and investors are now faced with a critical question: Will this significant spending be beneficial, or could it lead investors into a risky and overextended position? While Big Tech firms like Meta, Microsoft, and Google reported stronger-than-expected earnings to kick off the year, Amazon and Apple cautioned in their earnings reports that tariffs may impact their businesses negatively.
META
Meta's earnings report revealed impressive results, with shares rising, indicating strong investor enthusiasm. The company showed significant momentum, driven by AI-enhanced user engagement and improved profit margins. It raised its capex forecast for 2025 to between $64 billion and $72 billion, reflecting investments in data center capacity to support AI initiatives. Chief Financial Officer Susan Li mentioned the potential impact of hardware export tariffs on these costs. On the earnings call, CEO Mark Zuckerberg highlighted the transformative role of AI at Meta, reporting nearly one billion daily users of the AI assistant and 700 million monthly users as of January. Meta also launched a standalone Meta AI app and noted that AI tools boosted advertising revenue.
APPLE
Apple's shares fell by up to four percent in extended trading following its second fiscal quarter earnings report on May 1. Despite a five percent revenue growth and a twelve percent increase in service revenue, uncertainty regarding future quarters and tariff implications led to a three percent drop in pre-market trading. The company announced delays in key AI features, including improvements to Siri, which are now expected in 2026. CEO Tim Cook mentioned a projected $900 million increase in costs this quarter due to the US-China trade war, assuming no new tariffs are imposed. He confirmed that fifty per cent of iPhones sold in the US come from India, and most other products are sourced from Vietnam, both facing lower tariffs than China, although most products for other markets are still made in China. Apple reported quarterly revenue of $95.4 billion and a profit of $24.78 billion. However, economic uncertainty from the trade war, including high tariffs on China, has made some tech CEOs more cautious about the remainder of the year. In February, Apple announced its biggest spending commitment in the company's history, for $500 billion in the US over four years toward AI initiatives, manufacturing, and silicon engineering, among other expenses. CEO Tim Cook said in the company's Q1 earnings call last Thursday. "And we're going to be opening a new factory for advanced server manufacturing in Texas."
MICROSOFT
Microsoft's recent earnings report was impressive, with the stock rising 7.63%. Shares broke above the critical level of $400, currently trading around $425, indicating strong investor confidence in its AI strategy, especially the integration of Azure with OpenAI. The company reported $21.4 billion in capital expenditures (capex) for the first three months of 2025, down over $1 billion from the previous quarter, marking the first decline in AI-driven spending in ten quarters. During the earnings call, CEO Satya Nadella stated that demand for cloud and AI offerings remains strong, emphasizing their vital role in helping businesses grow. Concerns arose in February when TD Securities reported that Microsoft had withdrawn from certain data center contracts related to OpenAI, suggesting a slowdown in AI spending. Nadella addressed this, stating they have always adjusted their build and lease strategies. Microsoft’s cloud and AI strength fueled sales past $70 billion, up 13% from the previous year, with profits reaching $25.8 billion, an 18% increase. However, CFO Amy Hood indicated a more cautious approach to AI spending, expecting capex growth at a lower rate than FY 2025.
GOOGLE - ALPHABET
Google's parent company, Alphabet, experienced a 1.7% stock increase after reporting its first-quarter results for 2025 on April 24. The company spent $17.20 billion on capital expenditures during the quarter, a 43% increase compared to the previous year, and reaffirmed its $75 billion spending plan for the year, focused on AI infrastructure. Despite global economic uncertainty, Alphabet reported strong performance in Google's advertising business, which accounted for 75% of the total revenue of $90.23 billion. Advertising revenue rose 8.5% to $66.89 billion, exceeding analyst expectations. During the earnings call, Alphabet's business chief, Philipp Schindler, noted it is too early to fully assess the impact of new tariffs on the ads business, particularly affecting Asia-Pacific retailers. CEO Sundar Pichai emphasized ongoing healthy growth, attributing it to AI innovations, with features like AI Overviews attracting over 1.5 billion users monthly. Alphabet’s first-quarter revenue increased by 12% year-over-year, resulting in $2.81 per share earnings. Antitrust challenges loom over the company's core search and advertising divisions. Alphabet aims to invest $75 billion in capital expenditures for 2025, significantly above the consensus estimate, primarily targeting AI-related infrastructure. For the first quarter, capital expenditures reached $17.2 billion as they continue developing data centres for AI initiatives, including the Google Search AI overview and the Gemini chatbot.
AMAZON
Amazon is facing investor scrutiny as its shares fell about 2.5% in pre-market trading, especially with its AWS unit under pressure regarding profitability despite rising AI-related capital expenditures (CapEx). After announcing its Q1 2025 financial results on May 1, shares dropped more than two percent in after-hours trading. In Q1, Amazon reported over $24 billion in CapEx, up significantly from $14.92 billion in the same quarter of 2024, primarily for expanding AWS infrastructure to support growing AI demands. CEO Andy Jassy remarked that AWS might exceed its previous revenue potential, stating, "If you believe in making customers' lives better through AI, you'll invest aggressively," noting over a thousand AI applications in development.
AWS revenues grew by 17% to $29.3 billion, and overall revenue rose to $155.7 billion, a 9% increase year-over-year, with net profit hitting $17.13 billion. Amazon expects to invest $100 billion in CapEx this year, mainly for AI in AWS, with Jassy asserting that this represents a unique opportunity for growth that will benefit shareholders in the long term.
The mixed reactions to earnings reports reflect broader uncertainty about whether significant AI-related CapEx will provide long-term returns.:
Microsoft and Meta are leading in translating AI investments into immediate growth and margin expansion. In contrast, Apple and Amazon are exhibiting caution and facing market scepticism amid slower returns and macroeconomic challenges.
