Microsoft surges 15% in record $450B gain as AI trade splits

The AI trade delivered its sharpest divergence in megacap tech history as Microsoft's earnings-fueled rally added a record $450 billion in market value while Meta tumbled on a cash-flow miss.

The S&P 500 rose 1.66% and the Nasdaq Composite jumped 2.78% after Microsoft Corp.'s quarterly earnings crushed estimates, sparking a broad rally in technology and semiconductor stocks. The Dow Jones Industrial Average added 1.19%.

"Microsoft's ability to deliver both revenue growth and margin expansion in a single quarter is a powerful rebuttal to the bear case on AI spending," said Dan Ives, managing director at Wedbush Securities.

Microsoft surged 15%, its largest single-day gain since October 2008, adding $450 billion in market capitalization — the biggest one-day value creation in stock market history. The Philadelphia Semiconductor Index soared 8%, snapping a five-session losing streak, as storage and optical communication stocks led the charge. The Roundhill Storage ETF jumped 16.7%, with Kioxia Holdings Corp. ADR surging 32%, SanDisk Corp. gaining 26% and Micron Technology Inc. rising 18%.

The divergent outcomes underscore a growing reckoning for megacap tech: Investors are rewarding companies that translate AI infrastructure spending into visible revenue growth while punishing those where costs outpace returns. Meta Platforms Inc. fell 8% after reporting second-quarter free cash flow plunged 91%, extending its record losing streak.

Advanced Micro Devices Inc. jumped 13%, Intel Corp. gained 11% and SK Hynix Inc. rose 17%, while Lumentum Holdings Inc. and Western Digital Corp. each added 15%. Arm Holdings Plc climbed 7% after reporting first-quarter revenue of $1.29 billion, up 22% from a year earlier, with adjusted net income of $480 million, up 28%. Cloud infrastructure provider Nebius Group surged 27%.

Microsoft reported Intelligent Cloud revenue of $39.3 billion, about $1 billion above estimates, with Azure and other cloud services revenue rising 43%. The company earned an adjusted $4.74 per share on $90.01 billion in revenue, topping consensus estimates of $4.25 and $87.7 billion, respectively. JPMorgan analysts said Microsoft stands out among big tech for balancing revenue growth with profit margin management, while Citi analysts called the report a "solid rebuttal to the bear case."

This article is for informational purposes only and does not constitute investment advice.