Rising costs and high valuations are making investors cautious.
Analysts believe the next wave of tech growth may come from smaller, lesser-known companies.
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Markets reacted differently to the earnings of (NASDAQ:MSFT), (NASDAQ:GOOGL), and (NASDAQ:META) released last night. fell more than 3.5% after hours, dropped 6.5%, while rose 6.5%.
Alphabet’s shares climbed after it beat Wall Street’s expectations for third-quarter sales, driven by steady growth in its main advertising business and cloud division.
The company also raised its full-year capital spending forecast to between $91 and $93 billion, higher than earlier estimates of about $80.7 billion.
Microsoft also posted earnings and revenue above expectations, but investors were concerned about its rising capital spending — nearly $35 billion last quarter, mostly for AI projects. The company also cautioned that these expenses will continue to grow.
Meta faced a sell-off even after reporting solid results. The company took a one-time charge of almost $16 billion related to US President Donald Trump’s Big Beautiful Bill and said next year’s capital spending would be much higher than in 2025 due to its expanding AI investments.
Meta has stepped up its push into AI. CEO Mark Zuckerberg has been leading an aggressive hiring drive and announced plans to spend hundreds of billions of dollars building large AI data centers aimed at developing superintelligence.
Investors, however, are growing uneasy about Big Tech’s surging AI costs. Valuations are already high, and there is still little proof that AI adoption is meaningfully improving productivity.
From an investor’s view, this does not signal the end of the AI-driven tech rally. Instead, the market is likely entering a new phase where attention shifts away from the biggest names.
The next wave of growth may come from smaller, lesser-known companies that still trade at reasonable valuations and have stronger upside potential than the already expensive Mag 7 stocks.
Where to Look for the Next Big Opportunities in Tech
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Disclaimer: This article is written for informational purposes only. It is not intended to encourage the purchase of assets in any way, nor does it constitute a solicitation, offer, recommendation or suggestion to invest. I would like to remind you that all assets are evaluated from multiple perspectives and are highly risky, so any investment decision and the associated risk belongs to the investor. We also do not provide any investment advisory services.
