Jeran Wittenstein and Rainier Harris
6 min read
(Bloomberg) — After spending much of the year in the stock market doghouse over fears about their profligate spending on artificial intelligence, the world’s biggest technology companies are suddenly leading the way once again.
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The trigger was a pair of earnings reports last week showing that AI-related revenue growth is accelerating for what up until recently were two of the group’s worst performers, Microsoft Corp. and Amazon.com Inc.
Microsoft posted its results after the market closed on July 29, and the stock shot up 16% the next day. Amazon followed on July 30, and its shares leaped 15% in the next session. In the six sessions since July 29, Microsoft shares have soared 28% and Amazon’s have jumped 20%, adding a combined $1.3 trillion in market value.
“These are crazy times,” said Arup Datta, portfolio manager at Mackenzie Investments, which owns shares of both companies. “Markets are very manic on the up and on the down. You know, things move fast and sometimes overshoot.”
To get a sense of the magnitude of the reversal, consider that heading into Microsoft’s earnings report its stock had lost 19% for the year and was the biggest point drag on the S&P 500 Index. It’s now up 3.4% this year and among the 20 biggest point contributors to the broad equities benchmark, which hit a new all-time high this week in a push that was heavily driven by Microsoft’s strength.
Meanwhile, Amazon had been lagging behind the S&P 500 for most of the year, but its stock is now up 18% in 2026 and the fifth-biggest point contributor to the index’s advance.
Just two weeks ago, a strong quarter from Alphabet’s cloud-computing business was overshadowed by higher capital spending plans and disappearing free cash flow. The stock fell 7.1% the day after those earnings, but it then proceeded to rally back to the highest since June before this week’s reports of the departure of more AI veterans revived concerns about a brain drain at Google’s parent, sending the shares sliding again.
“There’s just a growing acceptance of the fact that these guys know what they’re doing,” said Tom Plumb, president and portfolio manager at Wisconsin Capital Management, which owns shares of Microsoft, Amazon and Alphabet. “I think people started to say, okay, Google or Alphabet and Microsoft may for the first time in multiple years be actually looking at negative cash flow because of the capital investment, but the return on that investment that they see more than justifies it.”
