Microsoft and Meta’s AI splurge still not enough for Nvidia

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Subscribe to enjoy similar stories. Money doesn’t solve all problems, but $37.4 billion should solve a few. That was what Microsoft and Meta Platforms have in combined capital spending in the December-ended quarter, according to the companies’ earnings reports Wednesday afternoon.

The expenditures were higher than what Wall Street had anticipated, not to mention nearly double from the same period the previous year. The bulk of it is going to chips and data centers to power generative artificial intelligence services. That should have been great news for Nvidia.

But the market’s prime AI chip maker saw its shares slip in after-hours trading following the reports of two of its largest customers. And that follows a bruising run that has already clipped around 15% off the company’s stock price since last week, when a Chinese AI startup published claims about developing an advanced AI model at a fraction of the computing cost required by U.S. competitors.

Nvidia is one of only three companies valued at more than $3 trillion, so such a drop leaves a wide mark. About $1 trillion of the U.S. stock market’s value was wiped out on Monday alone, according to Dow Jones Market Data.

Microsoft and Meta are two very different businesses with one big thing in common. Both are now spending about 30% of their annual revenue on capex, which is a much bigger percentage than what its rivals Amazon.com and Google’s parent, Alphabet, have committed. But investors have given Facebook’s company a much longer leash.