Technology giants are using a series of better-than-expected earnings reports to alleviate market concerns about their historic "money-burning" approach in artificial intelligence. Latest results indicate that this expensive AI bet is no longer just a cost sink, but is beginning to genuinely boost revenues, with an investment return narrative taking shape.

In this earnings season, Microsoft, Alphabet, and Meta emerged as clear winners. After posting double-digit revenue and net profit growth, the three companies saw their combined market capitalization surge by over $350 billion. Microsoft's market cap broke through the $4 trillion mark, trailing only chip manufacturer NVIDIA, while Meta's stock jumped 11%, pushing its valuation close to $2 trillion.

Driving this positive momentum are strong growth in Google and Microsoft's cloud businesses, along with improved advertising profit margins at Meta—all attributed to early applications of AI technology. Investors have consequently shown tolerance for new rounds of even larger capital expenditure plans, despite these giants' AI-related spending expected to exceed $350 billion this year.

"Even though spending shows no end in sight, the narrative has changed dramatically because these companies are now demonstrating returns," said Jim Tierney, head of AllianceBernstein's Concentrated U.S. Growth fund, noting positive market reactions driven by cloud computing revenue and AI services sales growth.

AI Monetization Path Becomes Clear: From Cloud Services to Advertising

The biggest highlight of this earnings round lies in how AI technology translates into tangible revenue. Strong growth at Microsoft's Azure and Google Cloud divisions is viewed as direct evidence of AI demand driving cloud business.

Meta provided more specific examples. Earnings showed that AI helped the company target advertisements more effectively and charge higher fees accordingly. Its price per advertisement increased 9% year-over-year, while ad delivery volume rose 11%. This series of data provided the market with compelling evidence that AI can enhance core business profitability.

Market euphoria was also boosted by other events. Design software manufacturer Figma's stock soared 250% on its debut day with a valuation exceeding $60 billion, further igniting optimism in the tech industry.

Capital Expenditure Race Escalates, But Market No Longer Panics

In previous quarters, investors had reacted negatively to tech giants' massive AI investments, fearing mismatched investment and revenue growth. But this time, they calmly accepted prospects of new rounds of capital expenditure expansion.

Earnings showed that Microsoft, Alphabet, Meta, and Amazon's data center and other AI infrastructure spending could exceed $350 billion this year and surpass $400 billion in 2026. Microsoft CEO Satya Nadella pledged $120 billion in investments over the next four quarters, while Meta provided guidance for $105 billion in capital expenditure next year.

The shift in market sentiment stems from tech giants pointing to strong demand for AI computing power and backlogged customer orders, while providing clearer explanations of how this emerging technology creates revenue.

"As long as revenue and booking data are there, they can spend as much as they want," said Jefferies analyst Brent Thill. "This is an ongoing capital expenditure war... only about five companies have the capability to spend at the scale required for this race."

Not All Winners: Amazon and Apple's Warning

However, not all giants can rest easy, as Amazon and Apple's situations remind the market that AI-related sentiment remains fragile.

As the quarter's biggest spender, Amazon's stock fell 7% after earnings release. Despite overall financial data exceeding expectations, analysts criticized the "disappointing" growth momentum of its market-leading AWS cloud division, especially compared to Microsoft Azure and Google Cloud.

Apple surprised the market with 10% revenue growth and solid iPhone sales, but its stock price gained little boost. Criticism of the company's slow progress in integrating AI persists, while regions heavily relied upon by its supply chain face direct threats from the Trump administration's tariff policies.

Hidden Concerns Amid the Frenzy: Regulatory Risks Remain

Behind the soaring performance, Silicon Valley's future still faces numerous obstacles. Antitrust regulators in the US, EU, and UK are pursuing a series of lawsuits against the industry that could result in tech groups being broken up or forced to open to competitors.

Alphabet, Meta, Microsoft, Amazon, and Apple all face varying degrees of legal action and investigations. Additionally, uncertainty around the Trump administration's tariff policies casts shadows over global supply chains.

"We're approaching, if not already at, the euphoric phase," warned Drew Dickson, founder of Albert Bridge Capital, "but the fact is, not everyone can win." He compared the current AI boom to 1880s railroads, 1920s radio, and the 1990s internet bubble.

"There will ultimately be winners and losers, but this won't become clear for some time," Dickson added. Market attention is focusing on NVIDIA, which will release earnings in late August. As the primary beneficiary of the AI spending boom, its performance will provide new commentary on this tech feast.