Big Tech Earnings Are a No-Win Test as Investors Punish Both Capex Cuts and Hikes

Meta fell 7% as AI spending outran its cash flow, and MetLife’s Drew Matus says investors punish spending cuts too.

Meta beat revenue estimates, with sales up 26%. Yet third-quarter capital expenditure (capex) of $34.9 billion topped operating cash flow, and shares fell on Oct.

What Do Investors Actually Want From AI Spending?

Four more tech giants face the same test after Meta’s selloff. Microsoft and Alphabet report Wednesday, followed by Amazon and Intel on Thursday.

Bloomberg’s hosts said the four make up about 15% of the Nasdaq 100, which has fallen roughly 7% this month.

Matus said firms that cut capex get punished. Firms that raise it get the same treatment.

“I don’t actually really know what people want from these people.” Drew Matus, chief market strategist at MetLife Investment Management, speaking on Bloomberg

Investors want proof that AI supports long-term growth, he said, yet debates over jobs and profits will persist.

Meta also announced a new class of nonvoting Class C stock. Scotiabank noted that management indicated an equity raise may be necessary.

Alphabet fell about 4% after hours in July when it lifted capex guidance. BeInCrypto’s filing review found AI capex draining cash at Microsoft and Amazon.

Can Big Tech Spend as Much as It Promises?

Matus doubted that headline budgets will turn into spending this year, since firms must find workers, equipment and land first.

However, he said industries most exposed to AI are hiring more people, not fewer.

The Federal Reserve (Fed) meets Oct. 27 and 28 in a packed Fed week. Its decision lands Wednesday afternoon, hours before Microsoft and Alphabet are due to report.

The Fed raised rates in September to a 3.75% to 4% range. Traders scaled back October hike bets after Chair Kevin Warsh said hotter inflation had not changed his view.

Matus expects Warsh to skip a move and revisit policy in December.

Matus argues AI drives capex, equity gains and consumer spending at once. He called that economic concentration more worrying than the stock market’s.

One weak outlook from a single company could therefore test that whole chain.