Microsoft's $381B Rout Exposes Dark Side of the AI Binge

tl;dr

Major analysts are tracking the onset of a "big tech" stock price rout, Half of a trillion dollars is being spent on AI data centers this year by 5 companies, including Microsoft, and these costs are now being weighed against earnings

Microsoft is a key indicator as earnings from its cloud business are unexpectedly stagnant. The absence of cloud earnings growth in the midst of exceptionally large spending on data center buildouts resulted in a wipeout of roughly $0.4 trillion of market cap on a $1.4 trillion valuation.

A chart of this year's capex vs. market valuation among big tech firms shows Amazon, Alphabet, Microsoft and Meta are way out on a limb with spending on data centers, having committed $70–125 billion each to buildouts, as compared to a larger community of related companies, including Apple and Tesla, with capex averaging $10 billion each.

Meta cloud market cap is not suffering like MSFT because they just reported best earnings growth in 4 years, but the article doesn't examine whether that growth in any way accommodates the $125 billion being spent right now.

According to chart, Nvidia stands out as far and away the most valuable firm in the charted constellation, yet its capex is in the bottom 5% of the spread of companies considered.