Big Tech stocks experienced a significant rebound, with Microsoft and Amazon both climbing over 5% on Monday. This surge was primarily driven by positive earnings reports that reassured investors about the substantial spending on AI data centers and chips. Microsoft's Azure business surpassed $100 billion in annual sales, growing 43% in its fourth quarter, while Amazon Web Services (AWS) saw its fastest growth in 18 quarters at 37%, with CEO Andy Jassy noting that even with increased capital expenditures, demand for capacity in 2026, 2027, and 2028 outstrips supply.
These gains followed a period where investors had been concerned about the hundreds of billions of dollars Big Tech was investing in AI infrastructure. Microsoft's stock, for example, had been near a one-year low before its earnings, experiencing a $357 billion wipeout earlier in the year. However, strong cloud growth and other indicators of AI demand appeased investors, pushing Microsoft's market value to $3.63 trillion and Amazon's to over $3 trillion for the first time.
Despite the positive stock movements, the high AI spending has impacted free cash flow. Microsoft's free cash flow fell 23% last quarter, and Amazon's turned negative for the first time since 2023. Microsoft spent a record $41 billion on capital projects last quarter and projected over $50 billion for the current quarter, while Amazon raised its 2026 capital expenditure forecast to about $220 billion from $200 billion due to rising memory chip prices. Google parent Alphabet also increased its capital expenditure forecast for the year to between $195 billion and $205 billion. In contrast, Meta Platforms saw its stock sink about 9% after mixed results, missing earnings estimates due to legal and severance costs, and also lifted the lower end of its capital expenditure expectations, shaking investor confidence. Oracle's stock, which had fallen over 7% since early June due to missed cloud sales projections, saw a small reprieve by jumping 6% on Monday, despite its substantial $300 billion, five-year deal with OpenAI.
