Tech Giants' Earnings Split: Cloud Strength Boosts Values, AI Spending Doubts Trigger Selloff
Six of the seven US tech giants reported earnings, driving nearly $2 trillion in market value swings. Microsoft, Amazon and Alphabet surged on strong cloud growth, adding a combined $1.5 trillion, while Apple, Meta and Tesla fell on AI spending concerns and supply issues. AWS revenue jumped 37%, but Apple dropped 7% on chip shortages. Amazon forecast $220 billion in 2026 capex, while Meta and Microsoft diverged sharply.
So far this earnings season, six of the seven US tech giants have reported results, and their combined market capitalisation has seen nearly $2 trillion in flows this week.
The three major hyperscale cloud providers - Amazon, Microsoft and Alphabet - all saw their market values surge after reporting strong cloud growth. Microsoft added more than $600 billion in market value this week, while Amazon and Alphabet each added more than $400 billion. Together, the three companies added nearly $1.5 trillion (approximately RMB 10 trillion) in market capitalisation.
In contrast, Meta's shares plunged after its earnings, erasing about $85 billion in market value this week as investors were unimpressed by its AI investment strategy. Apple suffered a steeper decline, losing more than $350 billion in market value this week due to memory chip shortages weighing on its outlook. Tesla's market value fell by about $7 billion after it reported negative free cash flow and forecast higher spending.
Investors are no longer questioning whether people are adopting AI or whether demand for chips and computing power is real. The core question is whether this demand can generate enough profits in the long run to justify such massive investment. That is the real issue currently being debated.
Apple, however, gave a weak revenue guidance for the current quarter, citing supply constraints. Its shares closed down more than 7% on Friday. The company is facing a severe shortage of memory chips, a key component in its devices, while also competing for chip manufacturing capacity.
Meanwhile, Amazon said its cloud computing business grew 37% year-on-year in the second quarter, the fastest growth since 2021. Amazon Web Services (AWS) is closely watched because it accounts for most of the company's AI-related sales. Investors view the unit as a barometer of demand for Amazon's AI products. Amazon forecast capital expenditure of $220 billion for 2026, up from a previous estimate of $200 billion, as it continues to invest in AI infrastructure. Its shares closed up more than 15% on Friday.
But AWS's growth appears to justify its capital spending. Amazon's shares have lagged so far in 2026, with a year-to-date gain of only about 4%. In comparison, Apple's shares have risen 23% over the same period. Because Apple has not undertaken massive capital expenditure expansion, some investors see it as an alternative investment to tech companies that are heavily investing in AI.
During this earnings season, as tech giants' share prices diverge, investors appear to be picking winners in the AI race. On Thursday, Meta fell 8% while Microsoft surged 15%, as investors priced the two companies' AI strategies very differently. Meta raised the lower end of its 2026 capital expenditure guidance range, but the social media giant's co-founder and CEO did not provide much clarity on cloud demand for its AI infrastructure. Investor patience is wearing thin, especially with Meta. Mark Zuckerberg insists they are considering alternatives (referring to cloud business), but no clear information was given on the earnings call, and investors reacted negatively.