A calm Fed announcement, then a noisy after-hours session.
Markets opened Wednesday with a shrug: the Federal Reserve left rates unchanged, repeating a patient stance that left traders penciling in a couple of rate cuts later this year. That steadiness was immediately tested by earnings from the biggest names in tech — and the tape came away looking conflicted.
Earnings carve the clearest lines
Meta led the charge in after-hours trading, rallying into double-digit territory after offering a first-quarter revenue outlook that beat analysts' estimates and reiterating massive AI investments. The company said its AI push would be a multibillion-dollar story this year, a commitment that underpins the upbeat guidance but also signals heavier spending ahead.
Microsoft, by contrast, had a rough night. Shares plunged as investors parsed slower cloud growth and the hit from rising capital spending and finance-lease expenses. Those items pressured profitability and raised questions about near-term margin resilience even as the company continues to push new AI initiatives — including moves on the image-model front with projects like its MAI-Image-1 effort that highlight why investors are watching both top-line innovation and bottom-line discipline Microsoft's MAI-Image-1.
Tesla beat quarterly expectations and nudged higher in extended trading, but headlines suggested something more structural is coming: the company signaled it will step up capital spending — a potentially large drag in the short term but a bet on capacity and future growth. Whether investors cheer expanded production capacity or fret about the near-term cash burn depends on how patient they feel.
A central bank in the background
The Fed's decision to hold rates wasn't a surprise — futures priced it in — but the language and Jerome Powell's press conference matter more than the headline. Officials described a labor market that's stabilizing and left the door open to meeting-by-meeting decisions. Traders continue to price in about two quarter-point cuts by year-end, which keeps a soft landing narrative alive but fragile.
That uncertainty is what makes big-tech capital plans so consequential. When companies like Meta or Tesla accelerate spending on AI and factories at the same time the Fed signals patience, the market is trying to balance growth optimism against a higher-for-longer financing backdrop.
Market micro-movements: chips, yields and gold
The Nasdaq held a slight edge for the day, helped by strength in semiconductor stocks — a familiar story when hopes for AI-driven demand bump up chip expectations. The S&P traded near record highs intraday but finished broadly flat as the disconnect between the winners and losers in tech offset each other. Bond yields and the dollar reacted modestly; gold nudged higher as some investors looked for safety amid the mixed signals.
Outside the big three, Amazon slid in sympathy with Microsoft after-hours, and the week still has other heavyweight reports lined up, including Apple and several financials, which could further shape the tone.
Why this matters for investors
Earnings season is doing what it's supposed to: forcing a re-evaluation of growth assumptions. A company that promises aggressive AI spending or rising capex invites two questions — how fast will revenue ramp from those investments, and can margins hold while the outlays happen? The market is currently split. Some traders reward bold guidance where it pairs with clearer near-term monetization; others punish companies that look like they'll temporarily trade profit for future scale.
The AI debate is bigger than any one report. Investors are weighing the potential for transformative returns against the reality of hefty upfront costs and mixed execution risk — a conversation that echoes the broader debate over how quickly AI will reshape profits and productivity AI’s Tipping Point: Pioneers Say Human‑Level Intelligence Is Here — Skeptics Say Not Yet.
What to watch next
The market will digest Apple's results after Thursday's close and continue to chase answers in economic data: weekly jobless claims, durable goods, and wholesale inventories will all feed into the Fed calculus. Meanwhile, traders will be watching further detail from tech earners for capex and AI spending cadence, because those items are shaping how bullish or cautious investors are willing to be.
One small but telling point: when megacaps disagree — one promising a big revenue beat while another warns of slower cloud expansion — it creates short-term volatility and longer-term uncertainty about how much growth is already priced into these stocks. Expect more of that tug-of-war as the quarter unfolds.
If you want a deeper look at how these corporate AI and tech bets are being built out on the product side, there are threads worth following in industry reporting and company filings, including the technology companies' own model releases and R&D roadmaps. For a sense of where Microsoft is placing some of its AI chips, see coverage of its internal imaging model work Microsoft's MAI-Image-1.
This week is shaping up as another lesson in nuance: the Fed's patience creates room for narratives, but earnings are forcing investors to pick which ones they believe.