Despite posting robust quarterly earnings, Microsoft (MSFT-5.10%) and Meta (META-3.82%) stocks plunged on Thursday as both tech giants signaled significant future AI spending needs and slower growth prospects. Shares of companies that have emerged as leaders in the AI ​​sector fell despite heavy investments in generative AI that had previously fueled investor optimism.

The downward pressure spread throughout the AI ​​ecosystem, pushing shares of major semiconductor and hardware vendors lower. Nvidia (NVDA-4.25%) fell 4.5%, Advanced Micro Devices (AMD-2.60%) fell 2.8%, Micron Technology (MU-3.93%) slipped 4.4% and Broadcom (AVGO-4.65%) fell by 4.8%. Meanwhile Super Micro Computer (SMCI-14.45%) experienced an even greater decline, falling by 15% amid an ongoing dispute with his auditor. The AI ​​hardware company is now threatened with a possible delisting from NasdaqThis creates further uncertainty for investors.

Microsoft cannot meet AI demand

In Microsoft’s (MSFT-5.10%) Third quarter earnings report on Wednesday evening, It admitted that it cannot build data centers fast enough to meet AI needs. “Microsoft’s inability to build data centers quickly enough has limited its guidance for the coming quarter,” Richard Windsor, founder of Radio Free Mobile, said in a note.

During a conference call with analysts after the results, Microsoft CEO Satya Nadella said the company encountered external constraints due to high demand for artificial intelligence Training And Conclusions.

“(Data centers) aren’t built overnight,” Nadella said. “Even in the second quarter, for example, some of our demand issues or our ability to meet demand are actually due to external equipment that we rent moving up. These are the limitations we have.”

Shares of the tech giant fell over 5% during trading on Thursday, trading at $409 per share. The stock is nearing its worst performance in months after falling nearly 2% over the past three months.

Meta spends a lot on AI

Parent Facebook meta platforms (META-3.82%) has invested billion dollars into it artificial intelligence what it looks like Keep up with his Great 7 Competitors. The tech giant warned that this spending will only increase next year and beyond.

Chief Executive Mark Zuckerberg gave analysts a hint of what some of those investments might look like in a call Wednesday, but said the company would provide more details once it sets its fourth-quarter budget.

“First, it is clear that there are many new opportunities to leverage new AI advances to accelerate our core business, which should deliver strong ROI over the next few years,” Zuckerberg said. “That’s why I think we should invest more there.”

“And secondly, our AI investments continue to require serious infrastructure, and I expect we will continue to invest significantly there,” he added.

Shares of Meta were down 3.75% on Thursday afternoon.

– Britney Nguyen and Rocio Fabbro contributed to this article