Source: Finance Association

Daring to ask where the AI path is, Musk confidently answered “the future is endless,” yet Meta's answer made people feel that “the future is not bright.” This also caused the two companies to be treated completely differently by the market after the earnings report was released.

Despite the disclosure of strong first-quarter earnings reports, Meta's stock price plummeted 15% after the US stock market on Wednesday because Meta sharply increased its annual capital expenditure, and its executives were ambiguous about their AI investment attitude and revealed a hint of “luxury” that made the market fearless, causing many people to worry that Meta will also embark on the path of spending a lot of money back then to promote its metaverse strategy.

At the same time, Meta's evasive rhetoric about the return on investment in artificial intelligence has also caused many investors to start questioning the reality of AI implementation. Meta CEO Zuckerberg's comment, “Smart investors don't look at the short term, but the long term”, successfully caused the market to start getting upset.

Jasmine Enberg, chief analyst at Insider Intelligence, said investors are skeptical about (Meta) growing AI spending, and they see that some investments may take years to pay off.

This has also dragged down tech stocks as a whole. After Wednesday's market, tech giants such as Alphabet, Microsoft, and Amazon, which have yet to disclose their results, were the first to experience a fall in stock prices, with Alphabet leading the way with a 3% decline.

In addition to Meta's old rivals, other AI stocks have also followed the decline. Shares of companies such as Nvidia, Ultramicrosemiconductor (AMD), Ultramicrocomputer, Dell, and Palantir also fell after the market, fully demonstrating the strength of Meta's “simple” earnings report.

Pressure on Alphabet and Microsoft

Jack Ablin, chief investment officer at Cresset Wealth Advisors, said that although Meta will use artificial intelligence in its work, it does not seem to be the biggest beneficiary of artificial intelligence adoption at present. The market can't see how artificial intelligence will benefit users right now, and while the technology may ultimately mean some cost savings, this is currently not visible.

Sophie Lund-Yates, chief stock analyst at Hargreaves Lansdown, pointed out that without Meta's bold artificial intelligence plans, the core of its business is still the advertising business.

What the market is currently wondering is how Meta, and even more tech companies, can turn expensive artificial intelligence into a profit booster for their core business. Obviously, Meta's earnings report did not provide an answer, leaving the market very disappointed.

This also put a lot of pressure on Microsoft and Alphabet, which announced earnings reports on Thursday, and their Q1 earnings report will also be a key signal for the market to choose whether to continue to be convinced of the AI story or leave the market first.

Wall Street analysts expect that Microsoft's earnings report, which surpassed Apple as the world's highest company by market capitalization earlier this year, may show that its multi-billion dollar investment in generative artificial intelligence is attracting customers to use its Azure cloud computing services.

Still, much of the impetus from artificial intelligence is expected to be realized starting next year. According to Morgan Stanley analysts, Copilot products will contribute $5 billion to the company's revenue in Microsoft's 2025 fiscal year, which starts in July.

Alphabet, on the other hand, may have to wait longer. Several analysts also pointed out that Google (an Alphabet subsidiary) is not in a hurry to monetize (monetize) AI technology, and that Google Cloud may take longer to benefit from artificial intelligence integration. And this could test the market's confidence in Google and artificial intelligence.

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