A wave of investor optimism swept through Wall Street as Meta and Microsoft shares soared following robust earnings and deepening commitments to artificial intelligence. Meta jumped 12% and Microsoft gained 5% after reporting results that easily topped analysts’ forecasts, with both companies outlining major capital expenditure plans to fuel their growing AI ambitions.

Microsoft’s rally pushed it past a $4 trillion market cap for the first time, placing it alongside Nvidia in the exclusive trillion-dollar club, CNBC reported. The milestone came as the software giant reported an 18% year-over-year revenue increase in its fiscal fourth quarter, reaching $76.44 billion. Its net income climbed to $27.23 billion, or $3.65 per share, from $22.04 billion a year earlier.

Meta delivered a similarly strong performance, reporting $47.52 billion in second-quarter revenue, up 22% from the previous year. Net income surged 36% to $18.34 billion, or $7.14 per share.

Source: GoogleFinance

Capex Signals Bigger AI Bets Ahead

What is more interesting is the scale of investment in AI infrastructure. Meta raised the floor of its 2025 capital expenditures range, now expecting to spend between $66 billion and $72 billion—up from a previous estimate that started at $64 billion. Meanwhile, Microsoft projected over $30 billion in fiscal Q1 capex and finance leases, significantly ahead of market expectations, which hovered around $24.2 billion.

The spending spree has wide-reaching implications. Analysts at Citi noted that chipmakers like Advanced Micro Devices (AMD) and Broadcom stand to gain from the increase. Microsoft accounts for about 8% of AMD’s revenue, while Meta makes up 2% of Broadcom’s.

At Meta, the AI drive isn’t just about servers and chips. CEO Mark Zuckerberg has ramped up hiring and recently announced a $14.3 billion investment in Scale AI, a data-labeling startup, along with the launch of Meta Superintelligence Labs. Morgan Stanley acknowledged the strength of Meta’s core business but questioned the pace of its AI expansion.

Microsoft’s Momentum Builds on Generative AI

Barclays analysts remained upbeat about Microsoft’s prospects, noting continued strength in data center demand and the company’s positioning in generative AI.

Despite lingering questions about the scale and speed of their AI investments, Meta and Microsoft made clear they have no intention of pulling back. For chipmakers, infrastructure firms, and investors betting on AI’s rise, that may be just what they wanted to hear.

Source: Finance Magnates