Nasdaq Drops 172 Points on MSFT AI Spend: Stock Market Today
Microsoft, Meta Platforms and a mid-cap energy stock have a lot to say about the state of the AI revolution today.
The main U.S. equity indexes recovered from their morning lows during another volatile trading session on Thursday. One big question drove price action, as investors, traders and speculators wonder when hyperscalers will start to see real payoffs from their recent spending sprees.
Tech stocks were the worst-performing group among the 11 official sectors, suffering under the weight of artificial intelligence expectations. Energy stocks, on the other hand, posted a collective gain of more than 1%, lifted by the AI boom.
A day after the first Fed meeting of 2026, federal funds rate futures pricing indicates markets don't expect another rate cut until President Donald Trump replaces Fed Chair Jerome Powell once his term is up in May. Indeed, CME FedWatch doesn't see a move on interest rates until June.
From just $107.88 $24.99 for Kiplinger Personal Finance
Become a smarter, better informed investor. Subscribe from just $107.88 $24.99, plus get up to 4 Special Issues
Sign up for Kiplinger’s Free Newsletters
Profit and prosper with the best of expert advice on investing, taxes, retirement, personal finance and more - straight to your e-mail.
Profit and prosper with the best of expert advice - straight to your e-mail.
Incoming data from the economic calendar, such as initial claims for unemployment insurance, continue to support Powell's view that though the jobs market has softened, it remains stable and that the economy, despite uncertainty about tariffs and inflation, is strong.
News from the earnings calendar, meanwhile, has even the biggest AI bulls repricing their expectations. We'll see what Apple (AAPL, +0.7%) has to say about iPhone sales and its own artificial intelligence ambitions when it reports fiscal 2026 first-quarter results this evening.
Down more than 500 points before noon, by the closing bell, the tech-heavy Nasdaq Composite was off 0.7% at 23,685. The broader S&P 500 declined 0.1% to 6,969, and the blue-chip Dow Jones Industrial Average rallied for a 0.1% gain to 49,071.
Looking for more timely stock market news to help gauge the health of your portfolio? Sign up for Closing Bell, our free newsletter that's delivered straight to your inbox at the close of each trading day.
MSFT vs META
Microsoft (MSFT, -10.0%) had its worst day since March 16, 2020, after the Dow Jones stock reported expectations-beating fiscal second-quarter results, with earnings of $4.14 per share on revenue of $81.3 billion, well above estimates of $3.91 and $80.3 billion.
Microsoft said capital expenditures for the quarter were $37.5 billion, above Wall Street's estimate of $36.7 billion. Forecast growth of 38% for its Azure cloud computing unit, an indicator of demand for its AI offering, was a bit of a letdown.
Wedbush analyst Dan Ives reiterated his Outperform (Buy) rating but cut his 12-month target price by 8%, to $575 from $625. Noting that Microsoft delivered "beats across all key metrics," the analyst says today's weakness creates "strong buying opportunities for long-term investors."
Indeed, Ives still considers MSFT "a core winner" on his IVES AI 30 list. "The Street wanted to see less capex spending and faster cloud/AI monetization," Ives explains, "and coming out of the gates it's the opposite."
Reiterating his argument that the AI revolution "is a multi-year journey," Ives says Microsoft should focus on its data-center buildout. "It's a balancing act, with 2026 the inflection year for AI and MSFT."
Meta Platforms (META, +10.4%) also topped Wall Street's estimates, reporting fourth-quarter EPS of $8.88 on revenue of $59.9 billion vs $8.21 and $58.5 billion, and management guided to first-quarter revenue growth of 26.4% to 33.5%.
The Facebook parent will spend as much as $135 billion on AI in 2026, which would represent an 87% increase over 2025. And management attributed 18% growth in overall ad impressions across its apps to its AI tools, a key differentiator for this AI stock.
"Sentiment has turned more constructive following the report," Wedbush analyst Scott Devitt observes, "as the aggressive level of investment within the current cycle is already delivering healthy revenue upside versus expectations and signals a commitment towards longer-term strategic objectives."
Devitt reiterated his Outperform (Buy) rating and raised his 12-month target price on META stock to $900 from $880.
A mid-cap energy stock generates a return
Liberty Energy (LBRT, +16.2%) is using AI to optimize its operations while it sees rising demand due to data-center energy requirements, and the mid-cap stock noted a 13% cash return on capital invested for 2025 when it reported fourth-quarter results on Thursday.
In addition to onshore oil and gas completion services, the company provides advanced solutions for customers operating in nuclear generation and battery storage through its Liberty Power Innovations unit.
Management reported 10.1% year-over-year and 9.6% quarter-over-quarter revenue growth to $1.04 billion, well above a consensus estimate of $881.8 million. Earnings before interest, taxes, depreciation and amortization (EBITDA) ticked up 1.1% annually and surged 23.4% sequentially to $157.5 million.
"Despite uncertainty around the timing of a broader market recovery, " Stifel analyst Stephen Gengaro writes, "management anticipates strong demand for its digiTechnologies platform and continued momentum within the LPI business, driven by data center power demand."
Gengaro has a Buy rating and a $23 12-month target price on LBRT stock.
Related content
-
Don't Overpay the IRS: 6 Tax Mistakes That Could Be Raising Your BillTax Tips Is your income tax bill bigger than expected? Here's how you should prepare for next year.
-
Flashback Finance: The Cost of Retiring the Year You Were BornJust like groceries, gas and home prices, the cost of retiring is subject to inflation. Here is a look at what it cost to retire in the year you were born.
-
How One Hospital Visit Overseas Could Wreck Your FinancesProper planning can give you peace of mind and protection, regardless of what happens on your trips.
-
Your Guide to Financial Stability as a Military Spouse, Courtesy of a Financial PlannerThese practical resources and benefits can help military spouses with managing a budget, tax and retirement planning, as well as supporting their own career
-
3 Steps to Keep Your Digital Data Safe, Courtesy of a Financial PlannerAs data breaches and cyberattacks increase, it's vital to maintain good data hygiene and reduce your personal information footprint. Find out how.
-
Here's Why You Can Afford to Ignore College Sticker PricesCollege tuition fees can seem prohibitive, but don't let advertised prices stop you from applying. Instead, focus on net costs after grants and scholarships.
-
S&P 500 Tops 7,000, Fed Pauses Rate Cuts: Stock Market TodayInvestors, traders and speculators will probably have to wait until after Jerome Powell steps down for the next Fed rate cut.
-
Today's Senior Living Communities Are Not Your Grandma's 'Old Folks' Home': An Expert Guide to Shopping for the Right FitSenior living facilities have improved and are as diverse as the people who inhabit them. Now, they're more than just a place to go — they're a place to grow.
-
3 Common Misconceptions About Working With a Financial PlannerThink financial planners are only for the wealthy and that AI can replace human advice? Nope. Even people with moderate wealth need professional advice.
-
Should You Consider Investing in the Quantum Computing Sector? This Investment Adviser Has Some SuggestionsInvestors interested in quantum computing could consider ETFs focused on cloud services enabling small businesses to use big technology.
-
S&P 500 Hits New High Before Big Tech Earnings, Fed: Stock Market TodayThe tech-heavy Nasdaq also shone in Tuesday's session, while UnitedHealth dragged on the blue-chip Dow Jones Industrial Average.
