Microsoft shares fell 7.5 percent in premarket trading on Thursday following disappointing cloud revenue results, raising concerns that the company’s significant investments in its OpenAI partnership are not generating returns quickly enough. In contrast, Meta’s shares surged nearly 9 percent after the company issued a positive revenue forecast and announced a 73 percent increase in its capital expenditure budget for the year. Tesla’s stock rose 2.4 percent after revealing plans to more than double its capital spending to a record level.
U.S. stock index futures showed modest gains as investors assessed earnings from major technology companies amid continued growth in AI-related investments. The Federal Reserve maintained interest rates as expected. At 7:00 a.m. ET, Dow E-minis were up 9 points (0.02 percent), S&P 500 E-minis rose 13 points (0.19 percent), and Nasdaq 100 E-minis increased 54.5 points (0.21 percent).
Recent earnings reports from three of the “Magnificent Seven” tech companies indicate that investors remain willing to accept substantial AI expenditures if they anticipate these investments will produce measurable returns. This group accounts for approximately one-third of the S&P 500’s market capitalization and has been a key driver of the ongoing rally in U.S. equities, maintaining elevated valuations.
Jake Behan, head of capital markets at Direxion, noted that investors are no longer rewarding the largest spenders indiscriminately, and Microsoft’s high capital expenditures have raised doubts about the profitability timeline of its AI investments. He added that capital spending remains a primary concern for large cloud service providers, as market focus shifts from growth metrics to the timing and returns of AI investments.
Other companies also reported earnings: shares of an unnamed company increased slightly after reporting higher quarterly revenue and profit, while Caterpillar’s shares rose 2 percent following a quarterly profit increase. Southwest Airlines’ stock climbed 5.3 percent after forecasting stronger-than-expected annual profits despite disruptions from U.S. winter storms.
Dow announced plans to cut approximately 4,500 jobs as part of a restructuring effort aimed at improving profitability by at least $2 billion, leading to a 1 percent decline in its shares. Apple shares rose 0.8 percent ahead of its earnings report scheduled after market close. IBM shares jumped 9.5 percent after exceeding fourth-quarter earnings estimates. In the materials sector, USA Rare Earth fell 9.6 percent, MP Materials dropped 5.1 percent, and both Critical Metals and United States Antimony declined by over 5 percent each.
