Despite posting strong quarterly profits, Microsoft (MSFT) and Meta (META) shares fell on Thursday as the two tech giants signaled significant demand for future AI spending and the prospect of slower growth. Companies that have emerged as leaders in the AI sector have seen their stock prices fall despite heavy investments in generative AI that had previously fueled investor optimism.
The downward pressure spilled over into the broader AI ecosystem, pushing down the stock prices of major semiconductor and hardware providers. Nvidia (NVDA) fell 4.5%, Advanced Micro Devices (AMD) fell 2.8%, Micron Technology (MU) fell 4.4% and Broadcom (AVGO) fell 4.8%. Meanwhile, Super Micro Computers (SMCI) faced an even steeper decline, plummeting 15% amid an ongoing dispute with its auditors. The AI hardware company is now at risk of possible delisting from the Nasdaq, creating further uncertainty for investors.
Microsoft can’t meet the demand for AI
Microsoft (MSFT) acknowledged in its third-quarter earnings report Wednesday evening that it can’t build data centers fast enough to meet AI demand. Richard Windsor, founder of Radio Free Mobile, said in a note that Microsoft’s “inability to build out data centers fast enough has constrained guidance for the next quarter.”
Microsoft CEO Satya Nadella said on a post-earnings conference call with analysts that the company faces external constraints due to high demand for artificial intelligence training and inference.
“(Data centers) are not something you can build overnight,” Nadella said. “Even in the second quarter, for example, some of the demand issues that we’re having, or our ability to meet demand, are actually due to external third-party products that we were leasing ahead of schedule. That’s the constraint we have.”
The technology giant’s shares fell more than 5% in Thursday trading, trading at $409 per share. The stock is close to its worst performance in months, down nearly 2% over the past three months.
Meta is investing a lot of money in AI
Facebook’s parent company, Meta Platforms (META), is investing billions of dollars in artificial intelligence in an effort to keep pace with its Magnificent 7 competitors. The tech giant warned that this spending will only grow further next year and beyond.
CEO Mark Zuckerberg gave analysts on a conference call Wednesday a hint at what some of these investments might look like, but the fourth-quarter budget is yet to be finalized. He said he would provide further details.
“First, it’s clear that there are many new opportunities to leverage new AI advances to accelerate core businesses that should deliver high ROI over the next few years,” Zuckerberg said. “So I think we should invest more there.”
“And secondly, our AI investments continue to require serious infrastructure, and I expect we will continue to invest heavily there as well,” he added.
As of Thursday afternoon, Meta stock was down 3.75%.
– Britney Nguyen and Rocio Fabbro contributed to this article
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