Major tech companies like Microsoft, Meta, Amazon, and Google are significantly increasing their investments in artificial intelligence infrastructure, projecting massive data center expenditures. Microsoft's stock recently dropped 10% despite beating revenue expectations, with its cloud business growing 39%. Wall Street analysts, however, anticipate a 46% stock advance for Microsoft in the next 12 months, noting its current valuation at 24 times forward earnings is the lowest in three years. Meta, also investing heavily in data centers and its own large language models, trades at 22 times forward earnings. Amazon plans to spend $200 billion on AI infrastructure by 2026, while Google doubled its budget for the second consecutive year to support its Gemini AI models. These substantial investments have led to investor scrutiny, causing Amazon's stock to fall 8% and Google's to drop 2% after their respective earnings announcements.
The rapid advancement of AI is also causing significant disruption across various sectors. Indian software companies are experiencing their worst week in four months, with the IT index losing nearly 18% since early 2025. This decline stems from concerns that new AI automation tools from U.S. firms Anthropic and Palantir could shorten project timelines, impacting India's $283 billion IT sector and major firms like TCS, Infosys, and Wipro. Similarly, Axon's stock fell over 30% due to Wall Street fears about AI disrupting the software industry. Amid this disruption, Ares Management Corp. sees opportunities to lend to software companies unfairly affected by AI concerns, planning to provide loans to help them navigate changes.
Conversely, some companies are directly benefiting from the surge in AI demand. Foxconn, also known as Hon Hai Precision Industry Co., reported a 35.5% year-on-year jump in January revenue to about $23 billion, driven by strong demand for AI servers, particularly those using Nvidia chips. The company expects sales to increase by 28% for the quarter ending March. Tokyo Electron, a key supplier of semiconductor tools, raised its operating profit outlook to $3.8 billion for the year ending March, citing extremely strong demand for DRAM chip equipment, including high-bandwidth memory. McKesson also reported strong fiscal Q3 earnings, with sales up 11% to $106.2 billion, attributing its success to investments in data, infrastructure, automation, and AI, which enhance customer experience, productivity, and fraud detection.
Key Takeaways
- Microsoft's stock dropped 10% post-earnings but analysts predict a 46% advance in 12 months, trading at 24x forward earnings, its lowest in three years.
- Meta Platforms and Microsoft are heavily investing in AI infrastructure, with Meta at 22x and Microsoft at 24x forward earnings estimates.
- Amazon plans to spend $200 billion on AI infrastructure by 2026, while Google doubled its AI budget for Gemini models, leading to stock drops of 8% and 2% respectively after earnings.
- Indian IT stocks, including TCS, Infosys, and Wipro, saw an almost 18% decline since early 2025 due to fears of AI automation tools from Anthropic and Palantir shortening project timelines.
- Ares Management Corp. plans to provide loans to software companies negatively impacted by AI fears, seeing new investment opportunities.
- Axon's stock fell over 30% due to Wall Street concerns about AI disrupting the software industry.
- Foxconn's January revenue jumped 35.5% year-on-year to $23 billion, driven by strong demand for AI servers, with a 28% sales increase expected for Q1.
- Tokyo Electron raised its operating profit outlook to $3.8 billion for the year ending March, citing strong demand for DRAM chip equipment, including high-bandwidth memory.
- McKesson reported an 11% sales increase to $106.2 billion and a 35% net income rise to $1.19 billion in fiscal Q3, crediting investments in data, infrastructure, automation, and AI.
Microsoft AI Stock Is Cheap Wall Street Sees 46 Percent Growth
Microsoft, a major tech company, is investing heavily in building its AI infrastructure. The company's stock recently dropped 10% after its latest earnings report, despite beating revenue and net income expectations. Microsoft's cloud business grew 39%, but some investors hoped for more given the high capital expenditures. Wall Street analysts expect Microsoft's stock to advance 46% in the next 12 months. The stock currently trades at 24 times forward earnings estimates, its lowest valuation in at least three years.
Meta and Microsoft Offer Cheap AI Growth
Meta Platforms and Microsoft are both major tech companies focusing on artificial intelligence and investing heavily in new infrastructure. Both companies, part of the Magnificent Seven, are considered industry leaders with strong earnings. Meta has built data centers and developed its own large language model to improve its apps and advertising. Microsoft offers a variety of AI products and services through its booming cloud business. Both stocks are currently trading at reasonable valuations, with Meta at 22x and Microsoft at 24x forward earnings estimates.
Ares Finds Investment Chances Amid AI Disruption
Ares Management Corp. sees new opportunities to lend money to software companies. Michael Weisser, a partner at Ares, noted that some companies are being unfairly hurt by investor fears about artificial intelligence. Ares plans to provide loans to these businesses, helping them navigate the changes and continue to grow. The firm believes AI disruption will create new markets and growth opportunities. Ares, which manages about $370 billion, focuses on opportunistic lending, taking on more risk for potentially higher returns.
Indian IT Stocks See Big Drop Due to AI Fears
Indian software companies are facing their worst week in four months as concerns about artificial intelligence deepen. New AI automation tools from U.S. firms Anthropic and Palantir are causing worries about shorter project timelines. This disruption could impact India's $283 billion IT sector, which relies on a large workforce. The IT index has lost nearly 18% since the start of 2025, with major firms like TCS, Infosys, and Wipro seeing their shares fall.
Big Tech Companies Boost AI Spending Stocks React
Amazon, Google, Meta, and Microsoft are significantly increasing their spending on artificial intelligence infrastructure, projecting massive data center investments for 2026. Amazon plans to spend $200 billion, while Google doubled its budget for the second year to support its Gemini AI models. Investors are questioning whether these huge investments will bring a good return, causing some stocks to drop. Amazon's stock fell 8%, and Google's was down 2% after their earnings announcements. Microsoft's AI spending is also rising, with its cloud business heavily relying on these investments.
McKesson Links AI and Tech to Strong Earnings
McKesson reported strong fiscal Q3 earnings, with sales increasing 11% to $106.2 billion and net income rising 35% to $1.19 billion. CEO Brian Tyler highlighted broad momentum across the company, especially in specialty services. CFO Britt Vitalone noted that investments in data, infrastructure, automation, and AI are driving sales and efficiency. McKesson uses AI to improve customer experience, boost productivity, and enhance fraud detection. The company also acquired an 80% interest in PRISM Vision Holding for about $850 million to expand its retinal care platform.
Axon Stock Drops Over AI Software Fears
Axon's stock has fallen more than 30% in just over a week. The company, which makes Tasers, body cameras, drones, and software for law enforcement, is seeing its shares drop. This decline is due to Wall Street's concerns that artificial intelligence will disrupt the software industry. Analysts believe investors are reacting quickly to these fears, impacting Axon's market performance.
Foxconn Revenue Jumps 35 Percent on AI Server Demand
Foxconn, also known as Hon Hai Precision Industry Co., saw its January revenue jump by 35.5% year-on-year, reaching about $23 billion. This strong growth suggests that demand for AI servers, especially those using Nvidia chips, remains high. Foxconn plays a key role in the AI hardware supply chain by manufacturing servers for data centers. Large U.S. tech companies like Meta Platforms and Amazon.com continue to invest billions in AI equipment, benefiting Foxconn. The company expects sales to increase by 28% for the quarter ending March.
Tokyo Electron Raises Profit Forecast on Strong AI Chip Demand
Tokyo Electron, a major supplier of semiconductor tools, has increased its operating profit outlook to 593 billion, or $3.8 billion, for the year ending March. The company reports extremely strong demand for equipment used to make DRAM chips, including high-bandwidth memory, a trend expected to last several years. While demand from China's memory and logic chipmakers is slowing, overall customer inquiries are robust. Tokyo Electron also announced a share buyback of up to 150 billion. The company expects to benefit from TSMC's plans to use 3-nanometer chip processes at its new factory in Japan.
Sources
- This AI Giant May Advance 46%, According to Wall Street. And Right Now, It's Dirt Cheap.
- Better Dirt Cheap AI Growth Buy: Meta vs Microsoft
- Ares Sees Investment Opportunities in AI Disruption
- Indian IT stocks set for worst week in four months as AI jitters deepen
- Amazon, Google, Meta, Microsoft boost AI spending, stocks react
- McKesson ties AI, automation, and specialty tech to operating momentum
- Axon Tased By AI Software Fears As Investors Shoot First
- Foxconn January Revenue Jumps 35.5% as AI Server Demand Holds
- Tokyo Electron Lifts Outlook in Sign of AI-Spurred Chip Spending
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