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The main U.S. equity indexes recovered from their morning lows during another volatile trading session on Thursday. One big question drove price action, as investors, traders and speculators wonder when hyperscalers will start to see real payoffs from their recent spending sprees.
Tech stocks were the worst-performing group among the 11 official sectors, suffering under the weight of artificial intelligence expectations. Energy stocks, on the other hand, posted a collective gain of more than 1%, lifted by the AI boom.
A day after the first Fed meeting of 2026, federal funds rate futures pricing indicates markets don’t expect another rate cut until President Donald Trump replaces Fed Chair Jerome Powell once his term is up in May. Indeed, CME FedWatch doesn’t see a move on interest rates until June.
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Incoming data from the economic calendar, such as initial claims for unemployment insurance, continue to support Powell’s view that though the jobs market has softened, it remains stable and that the economy, despite uncertainty about tariffs and inflation, is strong.
News from the earnings calendar, meanwhile, has even the biggest AI bulls repricing their expectations. We’ll see what Apple (AAPL, +0.7%) has to say about iPhone sales and its own artificial intelligence ambitions when it reports fiscal 2026 first-quarter results this evening.
Down more than 500 points before noon, by the closing bell, the tech-heavy Nasdaq Composite was off 0.7% at 23,685. The broader S&P 500 declined 0.1% to 6,969, and the blue-chip Dow Jones Industrial Average rallied for a 0.1% gain to 49,071.
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Microsoft (MSFT, -10.0%) had its worst day since March 16, 2020, after the Dow Jones stock reported expectations-beating fiscal second-quarter results, with earnings of $4.14 per share on revenue of $81.3 billion, well above estimates of $3.91 and $80.3 billion.
Microsoft said capital expenditures for the quarter were $37.5 billion, above Wall Street’s estimate of $36.7 billion. Forecast growth of 38% for its Azure cloud computing unit, an indicator of demand for its AI offering, was a bit of a letdown.
Wedbush analyst Dan Ives reiterated his Outperform (Buy) rating but cut his 12-month target price by 8%, to $575 from $625. Noting that Microsoft delivered “beats across all key metrics,” the analyst says today’s weakness creates “strong buying opportunities for long-term investors.”
Indeed, Ives still considers MSFT “a core winner” on his IVES AI 30 list. “The Street wanted to see less capex spending and faster cloud/AI monetization,” Ives explains, “and coming out of the gates it’s the opposite.”
Reiterating his argument that the AI revolution “is a multi-year journey,” Ives says Microsoft should focus on its data-center buildout. “It’s a balancing act, with 2026 the inflection year for AI and MSFT.”
Meta Platforms (META, +10.4%) also topped Wall Street’s estimates, reporting fourth-quarter EPS of $8.88 on revenue of $59.9 billion vs $8.21 and $58.5 billion, and management guided to first-quarter revenue growth of 26.4% to 33.5%.
The Facebook parent will spend as much as $135 billion on AI in 2026, which would represent an 87% increase over 2025. And management attributed 18% growth in overall ad impressions across its apps to its AI tools, a key differentiator for this AI stock.
“Sentiment has turned more constructive following the report,” Wedbush analyst Scott Devitt observes, “as the aggressive level of investment within the current cycle is already delivering healthy revenue upside versus expectations and signals a commitment towards longer-term strategic objectives.”
Devitt reiterated his Outperform (Buy) rating and raised his 12-month target price on META stock to $900 from $880.
A mid-cap energy stock generates a return
Liberty Energy (LBRT, +16.2%) is using AI to optimize its operations while it sees rising demand due to data-center energy requirements, and the mid-cap stock noted a 13% cash return on capital invested for 2025 when it reported fourth-quarter results on Thursday.
In addition to onshore oil and gas completion services, the company provides advanced solutions for customers operating in nuclear generation and battery storage through its Liberty Power Innovations unit.
Management reported 10.1% year-over-year and 9.6% quarter-over-quarter revenue growth to $1.04 billion, well above a consensus estimate of $881.8 million. Earnings before interest, taxes, depreciation and amortization (EBITDA) ticked up 1.1% annually and surged 23.4% sequentially to $157.5 million.
“Despite uncertainty around the timing of a broader market recovery, ” Stifel analyst Stephen Gengaro writes, “management anticipates strong demand for its digiTechnologies platform and continued momentum within the LPI business, driven by data center power demand.”
Gengaro has a Buy rating and a $23 12-month target price on LBRT stock.