Meta unveils AI ad targeting while Microsoft invests in OpenAI

Key Takeaways

• Meta Platforms' shares jumped 10% after a 24% Q4 revenue increase, driven by AI-powered ad targeting, signaling investor confidence in its AI strategy.
• Microsoft's stock fell 12%, losing $400 billion, due to slowing Azure cloud growth and concerns over its $280 billion investment in OpenAI, which accounts for 45% of its cloud backlog.
• OpenAI faces significant competition from Google's Gemini 3 and Anthropic's Claude Code.
• Tesla plans to double its AI spending to over $20 billion this year, despite a recent decline in annual profit.
• Taiwan Semiconductor, Broadcom, and AMD are identified as strong alternative AI stocks beyond Nvidia, with Taiwan Semiconductor benefiting from chip manufacturing, Broadcom from custom AI chips, and AMD from cost-effective solutions.
• Advantest, a semiconductor testing equipment company, reported a 64% surge in operating profit due to high demand for AI and high-performance chip testers.
• The rapid growth of AI data centers is creating a water shortage challenge, leading to investment opportunities in water and waste management solutions.
• Eli Lilly is a leader in AI drug discovery, building an AI supercomputer with Nvidia, with predictions that AI-developed drugs will be FDA-approved within five years.
• Monolithic Power Systems, an Nvidia partner, is gaining investor attention for its essential technology supporting AI data centers.
• Astera Labs announced new plans for improving connectivity in advanced AI clusters, with some analysts seeing it as undervalued despite its high P/E ratio of 145x.

Investors Demand AI Returns from Big Tech Spending

Investors are closely watching how major tech companies spend on artificial intelligence. Meta Platforms impressed Wall Street with a 24% revenue boost in the fourth quarter, thanks to AI improving ad targeting. This shows their AI strategy is paying off. However, Microsoft's Azure cloud growth was only slightly better than expected, and investors worry about its $280 billion investment in OpenAI. Tesla also plans to double its AI spending to over $20 billion this year, despite its yearly profit declining for the first time.

Big Tech AI Spending Gets Mixed Investor Reaction

Investors are reacting differently to how major tech companies spend on AI. Meta Platforms saw its shares jump 10% after reporting a 24% revenue increase in the fourth quarter, driven by AI-powered ad targeting. The company plans to increase data center spending significantly. In contrast, Microsoft's shares fell 6.5% as its Azure cloud growth slowed, and investors worried about its large investment in OpenAI. Tesla also announced plans to double its AI spending this year, showing a common trend of high investment in artificial intelligence across the industry.

Microsoft Stock Drops Amid AI Investment Concerns

Microsoft's stock fell sharply by 12%, losing about $400 billion in value, marking its worst day since March 2020. This happened after its Azure cloud computing growth slowed, and capital expenditures increased significantly to $37.5 billion. Investors are concerned about Microsoft's large investment in OpenAI, which makes up 45% of its cloud backlog, with $280 billion potentially at risk. OpenAI itself faces challenges, including competition from Google's Gemini 3 and Anthropic's Claude Code. Analysts suggest Wall Street wants to see faster returns from these massive AI investments.

Three AI Stocks Beyond Nvidia to Watch in 2026

While Nvidia is a strong AI stock, investors should consider diversifying with other companies. Taiwan Semiconductor, Broadcom, and AMD are three alternative AI stocks expected to do well in 2026. Taiwan Semiconductor manufactures chips for many major companies, including Nvidia, and sees a big boost from AI revenue. Broadcom designs custom AI chips for large cloud providers, with its AI semiconductor revenue growing rapidly. AMD, though currently behind Nvidia, aims to gain market share by offering more affordable AI chip solutions.

Smart AI Investments Beyond Nvidia for Next Year

For investors looking to diversify their AI portfolio beyond Nvidia, three strong alternative stocks are Taiwan Semiconductor, Broadcom, and AMD. Taiwan Semiconductor manufactures chips for many top tech companies, including Nvidia, and benefits greatly from increasing AI demand. Broadcom focuses on creating custom AI chips for large cloud providers, with its AI semiconductor revenue showing rapid growth. AMD aims to compete by offering more cost-effective AI chip solutions, hoping to gain market share in the coming years.

Eli Lilly Poised to Lead AI Drug Discovery Revolution

Artificial intelligence is set to change the pharmaceutical industry significantly by 2030, making drug discovery faster and easier. Experts predict the first AI-developed drug will be approved by the FDA within five years, and by 2030, over half of new medicines will use AI. Eli Lilly is a leading company in this transformation, actively building an AI supercomputer with Nvidia to boost its research and development. Eli Lilly has already made major breakthroughs in diabetes, weight management, immunology, and Alzheimer's disease, showing its strong innovation in the field.

Meta Platforms A Strong AI Stock for Long Term

Meta Platforms is considered an undervalued AI stock that long-term investors should consider. Despite its stock lagging the market recently, Meta's core social media business remains strong, using AI to improve ad targeting and user engagement. This has led to significant revenue growth from online advertising. While investors are concerned about Meta's huge AI spending, the company's valuation is reasonable compared to other large tech firms. Meta has also shown it can adapt by cutting costs and changing strategies when necessary.

Water Shortage Slows AI Data Centers New Investment Opportunity

The rapid growth of artificial intelligence is facing a new challenge: a shortage of water needed to cool massive AI data centers. These centers, like Microsoft's new facility in Arizona, can use millions of gallons daily. This problem creates a unique investment opportunity in companies that provide water and waste management solutions. Investors can look into "picks and shovels" businesses focused on water treatment, filtration, and recycling systems. The First Trust Water ETF FIW and Watts Water Technologies WTS are examples of investments that benefit from this essential infrastructure demand.

AI Chip Boom Boosts Advantest Sales and Profits

Shares of Advantest, a Japanese company making semiconductor testing equipment, jumped over 7% after reporting a record quarter. The company's operating profit surged 64% to 113.6 billion yen, and it raised its full-year profit forecast. This strong growth comes from high demand for its Test System Business, especially for testers used in advanced AI and high-performance semiconductors. Advantest's equipment ensures that complex chips work correctly before they are shipped. The company expects strong demand for its testers to continue, despite potential risks from global events and currency changes.

Astera Labs AI Roadmap Sparks Valuation Questions

Astera Labs recently announced a new plan to improve connectivity for advanced AI clusters, including better switching and optical links. While the company's stock has seen a 90.71% return over the past year, it experienced a slight decline recently. Some analysts believe Astera Labs is undervalued, seeing its fair price around $199.15 due to strong partnerships and future adoption of standards like UALink. However, others point out its high P/E ratio of 145x, which is much higher than industry averages, suggesting the market already expects significant future growth.

Amphenol A Strong Tech Hardware Company with AI Potential

Amphenol stands out as a strong tech hardware company that supplies connectors. It operates efficiently and manages shareholder capital well, despite many competitors in the electrical component industry. The company serves a wide range of markets, which helps it grow even when individual markets slow down. Amphenol also achieves the highest operating margins among its peers by effectively controlling costs and quickly making its acquired businesses profitable. This strong position allows Amphenol to benefit from new opportunities, including those in artificial intelligence.

Meta Soars Microsoft Falls After AI Earnings Reports

After recent earnings reports, Meta Platforms and Microsoft saw very different investor reactions to their AI spending. Meta's shares jumped 8% as its AI strategy, which boosted online advertising, led to 24% revenue growth. This signaled investor approval for its continued AI investments. In contrast, Microsoft's stock plunged because its Azure cloud growth slowed, and capital expenditures surged to $37.5 billion. Investors also worried about Microsoft's ties to OpenAI. Meanwhile, the broader tech sector saw mixed results, with IBM's AI business doubling while ServiceNow's stock fell.

Monolithic Power Systems Rises on AI Data Center Demand

Monolithic Power Systems, a partner of Nvidia, is gaining significant attention from Wall Street. The company provides essential technology that supports AI data centers and cloud services. Strong demand for its products has led to increased investor interest, pushing its shares onto the Investor's Business Daily Breakout Stocks Index, similar to Nvidia. The company is expected to release its fourth-quarter and full-year financial results soon.

Sources

• Big Tech results show investor demand for payoffs from heavy AI spending
• Investors punish Big Tech AI spending that delivers slower growth
• Microsoft stock plunges as Wall Street questions AI investments
• Beyond Nvidia: 3 Alternative AI Stocks That Will Soar in 2026
• Beyond Nvidia: 3 Alternative AI Stocks That Will Soar in 2026
• Prediction: Artificial Intelligence (AI) Will Reshape This Industry by 2030. This Stock Could Lead.
• 1 Beaten-Down AI Stock to Buy and Hold Forever
• Here’s a Critical Pick-and-Shovel Trade to Invest in the NIMBY Backlash Against AI Data Centers
• Advantest shares jumps over 7% after record quarter, lifts profit forecast on AI demand
• Astera Labs (ALAB) Valuation Check After Expanded AI Cluster Connectivity Roadmap
• Amphenol Is a Blue-Chip Tech Hardware Company With Diversification and AI Opportunity
• Meta and Microsoft are making big moves in opposite directions after earnings
• Nvidia AI Partner Breaks Out On Big Demand