When tech giants Microsoft (MSFT) and Amazon (AMZN) report earnings this week, investors will pay close attention not just to how much money they made, but also to how much they are spending, especially on artificial intelligence. Recent reports suggest that both companies may be slowing down their AI infrastructure investments, which has some worried about the broader tech and economic outlook. Portfolio manager Joe Tigay said that a slowdown in spending could be a warning sign for the economy and might hurt stock values, especially since prices are still not cheap by historical standards.
Microsoft and Amazon stocks have fallen this year due to recession fears and new trade tariffs. Amazon is now down more than 20% from its February peak, and Microsoft hasn’t reached a new high since last July. Amazon shares fell further after the White House criticized the company for reportedly planning to show how tariffs affect product prices. At the same time, the four biggest spenders on AI—Alphabet (GOOGL), Meta (META), Microsoft, and Amazon—are still expected to invest over $300 billion this year, though there are growing signs that spending may be slowing.
Indeed, Bloomberg recently reported that Microsoft is pausing some global data center projects, while Amazon was said to be doing the same, although it later said that its expansion plans haven’t changed. Investors are watching to see whether all this AI spending leads to real growth. Interestingly, Alphabet beat profit estimates in its cloud business last quarter and said that demand is now outpacing its capacity. As a result, analysts are mostly optimistic about Microsoft and Amazon and expect steady earnings growth.
Which Tech Stock Is the Better Buy?
Turning to Wall Street, out of the four stocks mentioned above, analysts think that AMZN stock has the most room to run. In fact, AMZN’s average price target of $245.33 per share implies more than 31% upside potential. On the other hand, analysts expect the least from MSFT stock, as its average price target of $480.78 equates to a gain of 22.4%.
