Meta, Microsoft Shares Plunge Amid AI Spending Concerns and Regulatory Risks
Meta Platforms (META) and Microsoft (MSFT) are two of the seven tech giants that have been underperforming their peers. This is evident from their recent stock price fluctuations, with META shares falling due to concerns over its aggressive spending on AI servers. The departure of Emily Dalton Smith, an executive responsible for Metamate, Meta's internal enterprise AI assistant, has also raised eyebrows among investors.
Microsoft (MSFT) shares have been affected by several headwinds, including the money-losing Xbox division, which will be cutting jobs and canceling promised games. This move is expected to weaken the attractiveness of its Xbox Pass subscription service. Furthermore, Microsoft's plans to expand its AI models usage among Chinese tech firms such as ByteDance, Ant Group, Meituan (MPNGF), and Tencent Holdings (TCEHY) has raised concerns about regulatory risks from the U.S. government.
The underperformance of these two companies is attributed to their failure to recoup their AI spending. Investors prefer to hold mega-cap firms with pricing power, such as Apple (AAPL), whose CEO Tim Cook warned that iPhone prices will rise due to memory inflation. In contrast, Meta and Microsoft continue to invest heavily in AI servers, which has raised concerns among investors.