AI Spending Faces Scrutiny

Microsoft and Meta are facing increased investor scrutiny regarding their significant capital expenditure on AI. The pressure is mounting on these tech giants to demonstrate clear pathways to profitability from their AI investments. Microsoft's AI plans are under close watch, especially after OpenAI, a key partner, began utilising cloud services from competitors.

Meta's aggressive AI spending, including a planned $55 billion for new AI data centres, is also raising questions about how the company intends to monetise these investments. While both companies have seen stock surges fuelled by AI enthusiasm, investors are now seeking concrete evidence of returns. Microsoft's Azure cloud performance and Meta's ability to translate AI investments into tangible results are key areas of focus.

Analysts are closely monitoring adoption rates of AI assistants like Microsoft's Copilot and the effectiveness of Meta's AI-powered engagement strategies. The earnings reports from these tech firms will likely set the tone for the sector, with any missteps potentially amplifying market volatility.