Tech Giants' AI Spending Under Scrutiny as Big Earnings Disparities Emerge

Major tech companies reported strong earnings last week, but investors are now focusing on whether their artificial intelligence (AI) investments are paying off. Apple's stock fell 7% after the company issued a weaker-than-expected sales outlook due to rising memory chip expenses.

The surge in DRAM costs, driven by demand from AI infrastructure, has created 'a 100-year flood on memory pricing,' according to CEO Tim Cook. This is putting pressure on Apple's margins despite strong third-quarter results, with revenue climbing 16% to $109.4 billion and iPhone sales rising 21%.

In contrast, Amazon and Microsoft posted impressive performances driven by growing demand for cloud computing and AI services. Amazon Web Services (AWS) revenue jumped 37% to $42.2 billion, while Azure growth soared 43%. Meta's shares fell over 6%, however, as investors questioned its AI spending strategy.

Big Tech earnings highlighted a widening divide in the AI race, with investors now prioritizing measurable returns from AI investments rather than just their size. Amazon raised its 2026 capital spending forecast by $20 billion to $220 billion as it invests in new data centers and AI capacity.