Microsoft, Meta AI capex takes center stage after Fed holds rates
The Fed held rates steady as investors turned to Microsoft and Meta earnings for clues on AI infrastructure spending.
By Theo Nakamura · Staff Writer
· 4 min read
The Federal Reserve kept interest rates unchanged Wednesday, but the next market test may come from Microsoft Meta AI capex plans. Investors are watching whether the two tech giants say their spending on artificial intelligence infrastructure is still rising, a signal that could move chip and data-center stocks along with the broader market.
The July Fed decision followed an unusually uncertain setup. Minutes before the 2 p.m. ET announcement, the CME FedWatch tool showed a 29% chance of a rate increase, according to CNBC Investing Club. The split inside the Federal Open Market Committee reflected that tension: three of its 12 members supported a quarter-point increase.
Stocks initially took the hold as a relief. CNBC Investing Club said the S&P 500 and Nasdaq recovered much of their earlier declines and moved into positive territory during Fed Chair Kevin Warsh’s press conference, which began at 2:30 p.m. ET.
Warsh told reporters the central bank “will not hesitate” to respond to inflation, which has stayed above the Fed’s 2% goal for years. He also said the Fed would “deliver on price stability,” while adding that doing so would take longer than the nearly nine weeks he has led the central bank. Warsh said he would not accept inflation above target, adding: “There is no soft inflation target. There is no soft implicit target.”
Why does Microsoft and Meta AI capex matter?
AI capex means capital expenditures, or the money companies spend on long-lived assets such as data centers, servers, chips and networking gear. For investors, the mechanism is direct: larger AI budgets can support demand for semiconductors and cloud infrastructure, while slower spending can hurt expectations for companies tied to the buildout.
Microsoft and Meta Platforms are both scheduled to report earnings Wednesday night. CNBC Investing Club said the main question for investors is how much the companies plan to spend this year and into calendar 2027 on AI infrastructure.
The focus follows Alphabet’s update last week. The Google parent raised its 2026 capital expenditure outlook by $15 billion, putting the new range at $195 billion to $205 billion, according to CNBC Investing Club. Alphabet also said it expects capital spending to rise significantly next year.
CNBC Investing Club said Alphabet’s higher spending should not have been a surprise after the company completed an approximately $85 billion equity capital raise in June. Still, the stock fell after the capex announcement before recovering nearly all of those losses over the next four trading sessions, according to the club.
What investors are watching in tech earnings
CNBC Investing Club said it expects Meta to lift its capex forecast, citing recent reporting about the company’s plan to build a cloud business and sell AI compute. AI compute refers to the processing power used to train or run AI systems, typically delivered through high-end chips and data-center capacity.
Microsoft is seen as less predictable, according to CNBC Investing Club, even though its Azure cloud business has faced capacity limits for several quarters. Azure is Microsoft’s cloud computing platform, and capacity constraints mean demand has exceeded the infrastructure available to serve it.
The timing makes the reports especially important. Alphabet has already reported, Microsoft and Meta are due Wednesday night, and Amazon is scheduled to report Thursday night. Together, those companies make up the “big four” hyperscalers, a term used for cloud companies that operate data centers at very large scale.
CNBC Investing Club said the recent drop in chip stocks shows the market is worried that AI-related capital spending may soon peak. Comments from Microsoft, Meta and Amazon over the next few days could either support that view or challenge it.
Beyond mega-cap tech, Starbucks is also set to report after Wednesday’s closing bell, giving investors another update on CEO Brian Niccol’s turnaround effort. Arm Holdings, Lam Research, Qualcomm, Chipotle, Fortinet and Carvana are also scheduled to post results, according to CNBC Investing Club.
Before Thursday’s open, scheduled reports include Mastercard, Bristol Myers Squibb, Cigna, Quanta Services, Crocs, Solstice Advanced Materials and American Electric Power. On the economic calendar, investors are also set to get the June PCE Price Index, the Fed’s preferred inflation gauge, and the first estimate of second-quarter gross domestic product.
This story draws on original reporting from CNBC.
