Stock market today: Nasdaq, S&P 500 sink as Meta, Microsoft revive Big Tech's AI spending worries

Meta (META) and Microsoft (MSFT) sank premarket as investors weighted their hefty AI expenditures against the time it will take to generate a return on their investment.

Meta fell as much as 4.7% before paring losses, while Microsoft was down 3.6%. During their earnings reports the night before, both companies beat Wall Street’s expectations, but Microsoft’s weaker-than-expected sales guidance for the current quarter and Meta’s raised outlook on capital expenditures appeared to spook investors.

Meta raised the lower end of its guidance range for full year spending from $37 billion to $38 billion, and Chief Financial Officer Susan Li said the company expects “significant capital expenditure growth in 2025.” Microsoft indicated in its fiscal first quarter earnings reports that spending on general artificial intelligence infrastructure (e.g., AI chips) weighed on gross margins, which it expects to continue in the current period.

Microsoft justified the spending by saying the demand for its AI products is real, and that infrastructure spending is necessary to continue to meet that demand.

“Roughly half of our cloud and AI-related spend continues to be for long-lived assets that will support monetization over the next 15 years and beyond,” said Microsoft Chief Financial Officer Amy Hood.

Meta said it’s seeing “rapid adoption of Meta AI.”

RBC Capital analyst Rishi Jaluria said to buy the dip on Microsoft: “While investors may be hung up on the optics of decelerating Azure growth paired with substantial CapEx, we see a path to upward revisions.”

Analysts also reiterated their Buy ratings on Meta stock.