Meta and Microsoft Stocks Drop as AI Spending Fatigue Hits Investors
Recent developments in the tech sector have shown a significant shift in investor sentiment towards artificial intelligence (AI) spending. Major players, Meta and Microsoft, have faced notable declines in their stock prices following their latest earnings announcements, primarily due to their escalated AI spending plans.
Decline in Meta and Microsoft Stocks
On Thursday, shares of Meta, the parent company of Facebook, plummeted by as much as 14%. This drop was triggered by the company’s announcement of projected expenditures ranging between $70 billion and $72 billion for AI capital expenditure in 2025. This forecast reflects an increase from the previous estimate of $66 billion to $72 billion.
Meanwhile, Microsoft reported a record capital expenditure of $34.9 billion in the last quarter, a significant jump from $24.2 billion in the prior quarter. As a result, Microsoft shares also fell by 3% at intraday lows on Thursday. Both companies are indicating plans for increased AI investment in 2026.
Investor Concerns and Market Sentiment
Investor confidence in the AI sector has become increasingly fragile. Concerns have arisen regarding a potential stock market bubble as investors reflect on the rapid gains achieved in recent years. Notably, the monetization strategies for AI remain vague, despite large sums being invested in infrastructure such as chips and data centers.
- Meta’s 2025 AI capex spending forecast: $70 billion to $72 billion.
- Previous capex guidance: $66 billion to $72 billion.
- Microsoft’s record capex in last quarter: $34.9 billion.
- Prior quarter’s spending: $24.2 billion.
- Meta stock decline: Up to 14%.
- Microsoft stock decline: 3% at intraday lows.
Industry-Wide Implications
Some analysts worry that current AI spending patterns may echo past market fads that experienced rapid declines. Notably, Meta’s previous heavy investments in the metaverse resulted in significant losses for the company.
Peter Berezin, chief market strategist at BCA Research, suggested that the recent stock declines in Meta and Microsoft serve as a “yellow flag” for the AI market. He indicated that when a major tech firm’s stock price falls following an announcement of increased capital expenditures, it may signal a broader caution regarding AI hype.
According to an analysis, Amazon, Meta, Microsoft, and Google collectively could spend as much as $320 billion on AI infrastructure capex this year. Industry experts warn that ambitious spending without clear returns may lead to substantial write-offs.
As the landscape evolves, investors are urged to carefully evaluate the sustainability of AI investments amid rising skepticism over the sector’s future.
