Among the Magnificent 7, Meta Platforms (META) and Microsoft (MSFT) are underperforming their peers. Amazon (AMZN) also pulled back, while Apple (AAPL) shares are steady.
Investors prefer to hold mega-cap firms that have pricing power. Apple CEO Tim Cook warned that iPhone prices will rise, since memory (RAM) inflation is continuing. Conversely, both Meta and Microsoft continue to spend aggressively on AI servers. Markets are growing increasingly worried that the two firms will not recoup their AI spending.
The departure of Emily Dalton Smith, an executive at Meta Platforms responsible for Metamate, is worrying. Metamate is an internal enterprise AI assistant.
After Microsoft shares spiked to over $450, traders sold the stock almost every day in June. Though software firm Salesforce (CRM), Autodesk (ADSK), and ServiceNow (NOW) dipped, Microsoft has multiple headwinds.
The money-losing Xbox division will cut jobs. It has also canceled many promised games in the last two years. That weakens the attractiveness of subscribing to an Xbox Pass. The cancelled titles included Everwild, Odyssey, and Perfect Dark.
More recently, Microsoft said that more Chinese tech firms would use its AI models. The rising usage from ByteDance, Ant Group, Meituan (MPNGF), and Tencent Holdings (TCEHY) is a concern. Not only might it draw regulatory risk is from the U.S. government, but it also suggests the U.S. market for AI is saturated.
Investors should continue to avoid MSFT and META shares.
