Microsoft had one of its worst selloffs in history after it increased its AI spending plans. Meta did the same, but it was rewarded by investors.

Why it matters: The wildly different market reactions to Meta and Microsoft earnings reveal the new calculus investors are using to evaluate AI winners and losers.

State of play: Microsoft reported solid earnings, with revenue and profit beating expectations, but its stock fell nearly 12%.

• Cloud revenue was up 39% from a year ago, but that was driven by non-AI workloads. Capital expenditure hit $37 billion for the quarter, a 65% jump.
• That mismatch is the issue: If a company is spending a lot, fine, but it needs to be spending on AI investments that will make it money now.
• Conversely, Meta beat on earnings, and its stock jumped even as it outlined over $115 billion in planned AI spend for the year, because investors believe its AI investments will fuel more growth in its biggest revenue driver: ads.

What they're saying: Meta also has a leg up because it is not a software company. Investor sentiment on software is "negative" to the point of the sector being "extremely radioactive," Anurag Rana, a senior analyst with Bloomberg Intelligence, tells Axios.

• Wall Street has software in the doghouse over concerns that with the explosion of Claude Code, software will be obsolete.
• The math behind what it takes to value a company completely breaks in a world where AI can replace software entirely.

Zoom in: At the heart of the reaction to both companies is a simple framework.

• Analysts use discounted cash flow models to value companies.
• These models rely heavily on future cash flows and a "terminal value" which is how much the business is worth beyond the forecast period.
• For big tech companies investing big money into AI, that terminal number can look great, because they stand to benefit from their investments in the technology longer term.
• This is why Meta was rewarded this earnings season: Its core business, advertising, is generating strong predictable cash.
• Analysts think AI will eventually add, not erode, Meta's future cash flows, making its valuation math easier to justify even with its huge spending.

Threat level: For software, the problem is some investors view AI as a complete replacement, which would demolish cash flows.

• This is why some investors see Microsoft's heavy AI spending and uncertain return timeline as a valuation risk.

Thought bubble: It's interesting investors are rewarding Meta for a business that will either be helped by AI, or not hurt if AI proves to unprofitable.

• Feels like part of a broader theme also seen in Alphabet's outperformance: Investors like companies that are either making money from AI today, or are fine even if they never do.

Amazon is in talks to invest as much as $50 billion into OpenAI, per reports yesterday, in a sign that the funding frenzy for AI shows no signs of stopping.

Why it matters: The potential deal comes as Wall Street has been shunning companies that partner with OpenAI (see Microsoft's stock decline yesterday), and investors worry whether the AI upstart behind ChatGPT will ultimately be able to pay off all its backers.

Zoom out: OpenAI has been seeking to raise $100 billion in new capital, per the Wall Street Journal, which first reported the Amazon talks. An investment could include a deal for OpenAI to buy AI chips from Amazon, CNBC reported.

• That kind of circular dealmaking — funneling money into companies you hope will give you business — has also raised eyebrows among investors.

Follow the money: The larger question is where exactly is all that cash going?

• Can OpenAI cover the bill? Its annualized revenue surpassed $20 billion in 2025, up from $6 billion in 2024. But it has $1.4 trillion in spending planned.
• That vast mismatch is what investors are worried about.

What they're saying: OpenAI "was the halo around the heads of all these companies" whose stocks have taken a hit and now it "will become the noose around their neck," Daniel Newman, tech analyst and CEO of the Futurum Group, tells Axios.

• Take Microsoft: The company reported a $620 billion backlog in upcoming revenue, but nearly half of that is expected to come from OpenAI.
• Microsoft stock tanked 10% in trading yesterday, even though that amount is almost two years of revenue, because investors just don't buy it.

State of play: Amazon's potential investment comes as the company is retrenching in other areas, including plans to lay off 30,000 people.

• It also closed Amazon Fresh and Amazon Go.
• Amazon declined to comment for this story.

The bottom line: Amazon is casting fishing lines to future-proof its business.

Gold has outperformed bitcoin over the last five years, in no small part due to its recent ferocious rally coupled with the crypto slump.

Why it matters: An ancient metal is beating what was supposed to be the next-generation currency.

What they're saying: "Gold is acting more like a safe-haven asset, a dollar hedge and benefiting from the geopolitical and debasement concerns, and crypto is acting more like a leveraged growth asset with a higher correlation to the tech trade," Keith Lerner, chief investment strategist at Truist, tells Axios.

Zoom in: There's reason to hold gold even if you don't see this rally continuing.

• Goldman Sachs is telling investors to be long gold and stocks as the latest "barbell," a portfolio strategy that calls for holding steady assets at one end and riskier ones at the other.
• "You want to be long stocks because they can give you 15% to 20% growth," Anshul Sehgal, global co-head of fixed income, currency and commodities at Goldman Sachs, says on The Markets podcast. "And you want to be long physical and precious metal, which have no growth attached to them. But that's the barbell portfolio in this world, instead of say, fixed income."