The latest quarterly reports from the world's largest tech firms have deepened the divide on Wall Street between perceived winners and losers in the artificial intelligence race. These companies either confirmed or raised their capital expenditure forecasts, signaling that the era of massive investment is far from over.
For the six mega-cap tech stocks that have reported this earnings season, nearly $2 trillion in total capital flowed in and out. The three major hyperscale cloud providers — Amazon.com, Microsoft, and Alphabet — all saw their market capitalizations surge after posting robust cloud business growth. This suggests investors believe that returns on the hundreds of billions being poured into AI may be imminent.
Microsoft added over $600 billion to its market cap this week, while Amazon.com and Alphabet each gained more than $400 billion. On the other end of the spectrum, Meta Platforms, Inc. saw its stock price plunge after its earnings report, as its AI investment strategy failed to convince investors. The company lost roughly $85 billion in market value this week.
Apple suffered an even larger decline, losing more than $350 billion in market capitalization after a memory shortage weighed on its business outlook. Tesla shed about $7 billion in value due to negative cash flow and expectations of increased spending. Jason Greenberg, Co-Head of Global Technology, Media, and Telecom Investment Banking at Jefferies, noted on Friday that total AI spending by major tech firms is "trending toward" $800 billion over the next 12 months.
Greenberg stated that investors are no longer questioning whether people are adopting AI or if there is genuine demand for chips and computing power. "The question is, will the demand generate enough profit over the long term to justify all this investment?" Greenberg said. "I think that's what we're really wrestling with right now."
Apple beat market expectations for earnings, revenue, and iPhone sales. However, the company issued a weak outlook for the current quarter, citing "supply constraints." According to LSEG data, Apple forecasted revenue growth of between 9% and 11% in the current quarter, below the 12% growth analysts had predicted. Apple shares closed down more than 7% on Friday. The company is facing a severe shortage of memory, a key component, and competition for chip manufacturing capacity. This has already led Apple to raise prices on its Mac and iPad lines, and analysts expect iPhone prices to increase this year as well.
Meanwhile, Amazon.com reported that its cloud computing business saw a 37% year-over-year revenue increase in the second quarter, its strongest expansion since 2021. Its Amazon Web Services (AWS) unit is closely watched by the market, as it is the division where the company books most of its AI-related sales. Investors use this as a key metric to gauge demand for Amazon.com's AI products. Amazon.com shares closed up more than 15% on Friday, as the company projected capital expenditures of $220 billion this year, up from a previous forecast of $200 billion, as it continues to invest in AI infrastructure.
With market concerns that big tech investment is outpacing demand, investors have been scrutinizing AI spending. But Amazon.com's own cloud business growth appears to validate its capital expenditures. Forrester Principal Analyst Tracy Woo stated in a report on Thursday that AWS's strong growth "clearly indicates that its infrastructure investments are meeting market demand, not outpacing it."
Amazon.com stock has been an underperformer in 2026, rising only about 4% year-to-date. Over the same period, Apple has gained 23%. Apple is seen by some as a hedge against the big-spending tech stocks, as it has not been engaged in massive capital expenditure expansion. This earnings season, investors appear to be picking winners in AI, creating a divergence in the stock movements of the mega-cap tech firms. On Thursday, Meta Platforms, Inc. fell 8%, while Microsoft rose 15%, reflecting the market's differing views on the two companies' AI strategies.
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