US stocks rebounded strongly on Thursday as investors returned to technology shares following the previous session’s Federal Reserve-driven sell-off, with Microsoft’s results restoring confidence in artificial intelligence spending and helping lift the wider market.
The S&P 500 climbed 1.7%, while the Dow Jones Industrial Average added almost 1.2%. The Nasdaq Composite outperformed with a gain of more than 2.8%, driven by renewed buying across technology and semiconductor stocks after the Nasdaq-100 entered correction territory on Wednesday.
Microsoft was the attention grabber after delivering results that shifted the conversation around AI investment. Shares jumped more than 16%, marking their biggest one-day advance since 2008, after the software giant revealed its Azure cloud platform generated more than $100 billion in annual revenue for the first time.
Azure revenue increased 43% during the latest quarter, exceeding Wall Street expectations of around 40% and recording its fastest growth in four years.
The figures came despite Microsoft increasing capital expenditure by 70% to $41 billion as it continued expanding data centre capacity and AI infrastructure.
Investors had questioned whether rising spending across the technology sector would generate sufficient returns, but Microsoft’s latest results suggested that additional computing capacity was already translating into stronger revenue growth.
The company also forecast Azure growth of around 45% next quarter, while indicating capital expenditure would exceed $50 billion as demand continued to outstrip available capacity.
Chief Financial Officer Amy Hood said efficiency improvements were being converted into revenue quickly, adding that new computing capacity was being monetised almost immediately.
The positive reaction contrasted sharply with the market’s response to Alphabet a week earlier. Google Cloud revenue rose 82% and profitability improved, yet Alphabet shares fell 7% after management increased its spending outlook, as investors focused on the cost of expanding AI infrastructure rather than the pace of growth.
Meta moved in the opposite direction to Microsoft after reporting quarterly results on Wednesday. Shares fell around 8%, extending the company’s losing streak after its earnings missed expectations and renewed concerns about how quickly its AI investment programme will generate returns.
Microsoft’s wider financial performance also exceeded forecasts. Revenue increased 18% to $90 billion, ahead of expectations of $87.7 billion, while adjusted earnings reached $4.74 per share compared with forecasts of $4.25. Operating income climbed to $40.6 billion, reinforcing investor confidence in the company’s cloud strategy.
Attention now turns to Amazon and Apple, both due to report after Thursday’s closing bell. Investors will closely scrutinise Amazon’s cloud business and capital expenditure plans, while Apple’s results are expected to provide further detail on profit margins as higher memory chip prices continue affecting the technology sector.
