The most important signal released by the financial reports of tech giants: AI is starting to make money!

Tech giants are alleviating market anxiety about their historically "money-burning" model in the field of artificial intelligence with a series of better-than-expected financial reports. The latest performance indicates that this expensive AI bet is no longer just a cost black hole, but is beginning to significantly boost revenue, forming a narrative of investment returns.

In this earnings season, Microsoft, Alphabet, and Meta have emerged as clear winners. After reporting double-digit revenue and net profit growth, the combined market value of the three companies surged by more than $350 billion. Among them, Microsoft's market value surpassed $4 trillion, following chipmaker Nvidia; Meta's stock also soared by 11%, bringing its market value close to $2 trillion.

Driving this positive momentum are the strong growth of Google and Microsoft's cloud businesses, as well as the improvement in Meta's advertising profit margins—both attributed to the initial application of AI technology. As a result, investors have shown tolerance for a new round of larger-scale capital expenditure plans, even though these giants are expected to spend more than $350 billion on AI-related expenses this year.

"Although spending seems endless, the narrative has changed dramatically because these companies are now demonstrating returns," Jim Tierney, head of the concentrated U.S. growth fund at AllianceBernstein, told the Financial Times, noting the positive market response driven by growth in cloud computing revenue and AI service sales.

The Path to AI Monetization Becomes Clearer: From Cloud Services to Advertising

The biggest highlight of this earnings report season is how AI technology is being converted into tangible revenue. The strong growth of Microsoft's Azure and Google's cloud division is seen as direct evidence of AI demand driving cloud business.

Meta provided a more specific case. The earnings report showed that AI helped it target ads more effectively, allowing it to charge higher fees. The price per ad increased by 9% year-on-year, while ad placements rose by 11%. This series of data provides strong evidence to the market that AI can enhance the profitability of core business operations.

The market's enthusiastic sentiment was also boosted by other events. Design software maker Figma's stock soared 250% on its first day of trading, with a valuation exceeding $60 billion, further igniting optimism in the tech industry.

Capital Expenditure Race Intensifies, but the Market is No Longer Panic-Stricken

The Financial Times reported that in previous quarters, investors had a negative reaction to the massive funds tech giants were pouring into AI, worrying that investments would not match revenue growth. However, this time, they calmly accepted the prospect of a new round of capital expenditure expansion.

The earnings reports indicate that Microsoft, Alphabet, Meta, and Amazon's spending on data centers and other AI infrastructure is expected to exceed $350 billion this year and will surpass $400 billion by 2026. Microsoft CEO Satya Nadella has committed to investing $120 billion over the next four quarters; Meta has also provided a capital expenditure guidance of $105 billion for next year.

The shift in market sentiment stems from tech giants pointing to strong demand for AI computing power and a backlog of customer orders, providing a clearer explanation of how this emerging technology can generate revenue "As long as the revenue and booking data are there, they can spend as much as they want," said Brent Thill, an analyst at investment bank Jefferies. "This is an ongoing capital expenditure war... only about five companies have the ability to spend at the scale required for the competition."

Not All Roses: Warnings from Amazon and Apple

However, not all giants can rest easy, as the situations of Amazon and Apple remind the market that sentiment around AI remains fragile.

As the company with the highest spending this quarter, Amazon's stock price fell 7% after the earnings report was released. Despite its overall financial data exceeding expectations, analysts criticized the growth momentum of its market-leading AWS cloud division as "disappointing," especially in comparison to Microsoft Azure and Google Cloud.

Although Apple surprised the market with a 10% revenue growth and strong iPhone sales, its stock price did not receive a significant boost. Criticism of the company's slow progress in integrating AI persists, while regions heavily reliant on its supply chain face direct threats from the Trump administration's tariff policies.

Concerns Amidst the Frenzy: Regulatory Risks Persist

Behind the strong performance, Silicon Valley's future still faces numerous obstacles. Antitrust regulators in the U.S., EU, and UK are filing a series of lawsuits against the industry, which could lead to tech giants being broken up or forced to open up to competitors.

Alphabet, Meta, Microsoft, Amazon, and Apple are all facing varying degrees of legal lawsuits and investigations. Additionally, the uncertainty surrounding the Trump administration's tariff policies casts a shadow over the global supply chain.

"We're not there yet, but we're close to a frenzy stage," warned Drew Dickson, founder of Albert Bridge Capital. "But the fact is, not everyone can win." He compared the current AI craze to the railroads of the 1880s, radios of the 1920s, and the internet bubble of the 1990s.

"In the end, there will be winners and losers, but that won't be clear for some time," Dickson added. The market's focus is on NVIDIA, which will release its earnings report in late August; as a major beneficiary of the AI spending boom, its performance will provide new insights into this tech feast