Mag 7 Beat Earnings by Record 70%+, Stocks Crash Anyway on $650B AI Spending Fear

Big Tech delivered strong results this week, but the market reaction was uneven. Mag 7 stocks reported earnings well above expectations. Despite this, several names sold off after hours. The focus quickly shifted from quarterly performance to future spending. This was particularly around artificial intelligence. Investors are now deciding whether rising costs could pressure returns, even though revenue and profit are growing.

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Meta Up 56%, Amazon 70%, Google 7% – All Dump as Market Rejects $650B Capex Blowout

The earnings themselves were solid. Meta earnings beat estimates by about 56%, but the stock fell roughly 7% after the release. Amazon’s earnings exceeded expectations by nearly 70%. But it initially dropped before seeing a slight recovery. Google earnings came in around 7% above estimates and moved higher, while Microsoft also posted a smaller beat and gained.

This shift is mostly tied to spending expectations. The four companies are expected to invest around $650 billion in AI by 2026. Meanwhile, Meta raised its capital expenditure outlook to as much as $145 billion. Alphabet guided up to $185 billion, and Amazon is expected to spend close to $200 billion. Microsoft’s AI business has generated $37 billion in revenue. Satya Nadella, CEO of Microsoft, said,

“We are focused on delivering cloud and AI infrastructure and solutions that empower every business to eval-max their outcomes in the agentic computing era.”

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Investors’ Focus Shifts to AI Spending

This level of investment is already impacting financials. Amazon said free cash flow declined due to a $59.3 billion increase in infrastructure spending. This is mostly tied to AI. Meta reported $19.84 billion in capital expenditure for the quarter and highlighted more increases in the future.

At the same time, expectations were already high. Meta and Amazon had already rallied sharply in the weeks leading up to earnings. The valuations remain high. Profit margins across the S&P 500 are also near multi-year highs. Chris Brigati, chief investment officer at SWBC, a Texas-based financial group, said:

“Stocks are again trading at record highs, reflecting strong investor confidence, but the S&P 500’s heavy concentration in the Mag 7 technology leaders elevates downside risk should earnings fall short, as valuations leave little margin for error.”

For now, earnings beats are not the main driver of stock movement. Investors are paying closer attention to how quickly these companies can generate returns from large-scale AI investments. Until there is more clarity on that front, reactions to even strong results may remain mixed.

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