Stock market surges following Microsoft's entry into the $4 trillion elite club after impressive earnings report
In a significant development for the tech sector, investments in artificial intelligence (AI) by leading companies such as Microsoft and Meta have driven impressive earnings and market capitalization gains, boosting the S&P 500 and Nasdaq market performance.
Microsoft and Meta's AI investments proved to be a key factor in their better-than-expected earnings in 2025. Microsoft's Q4 revenue grew by 18% year-over-year, reaching $76.4 billion, while net income increased by 24% to $27.2 billion. Meta's Q2 revenue saw a 22% year-over-year growth, with its Q2 revenue reaching $29.08 billion.
The strong earnings were accompanied by increased capital expenditure guidance. Microsoft raised its Capex growth outlook to 25%, while Meta increased AI-related hardware and infrastructure spending to around $66–$72 billion for the year, well above previous expectations.
The market reacted strongly to these earnings and AI investment updates. Microsoft shares jumped 9%, and Meta's rose by 10–11% immediately after their earnings calls. This added hundreds of billions in market value for both companies, reflecting investor confidence that AI investments are translating into real business growth and competitive advantage.
Microsoft's market capitalization surpassed $4 trillion, marking it as one of only two companies worldwide to reach that threshold. The achievement was supported by strong demand for Microsoft's cloud and AI services.
While other AI-focused mid-cap companies have also outperformed many big tech peers in 2025, the "Big Tech" influence on the S&P 500 and Nasdaq largely stems from the earnings power and market cap of giants such as Microsoft and Meta.
The strong performance of these tech giants has contributed to the S&P 500 and blue-chip Dow's third straight monthly gain, their longest winning streak in nearly a year. The Nasdaq Composite also gained 1.16%, setting it on track for its best monthly run since March 2024.
Meanwhile, in other financial news, the Fed decided to keep interest rates unchanged at its recent meeting, as inflation remains sticky. Economists expect price pressures to pick up in the second half of the year due to tariffs on imports.
In the broader market, declining issues outnumbered advancers by a 1.17-to-1 ratio on the NYSE, and by a 1.16-to-1 ratio on the Nasdaq. The S&P technology index and the communication services index both hit record highs.
In separate developments, EU officials said European liquor could face 15% tariffs from August 1 until a different agreement is reached. Trump's deal with South Korea on Wednesday cut the country's import tariff to 15% from the previously threatened 25%.
Traders now see a 58.8% chance the Fed will stay pat in September, according to CME's FedWatch tool. Federal Reserve Chair Jerome Powell diluted investor expectations for an interest rate cut in September after the central bank kept rates unchanged.
Clark Bellin, president and chief investment officer of Bellwether Wealth, stated that the recent PCE report was stronger than expected and does not support the idea of a fall rate-cut. Nvidia gained more than 1%, and among other stocks, Applied Digital soared 32.7% after the data center operator surpassed estimates for quarterly revenue.
Meta Platforms climbed 12.1% to an all-time high in early trading. The company's strong earnings and AI investments have positioned it for continued growth in the tech sector.
- The impressive earnings and market capitalization gains of Microsoft and Meta, driven by their investments in artificial intelligence (AI), have significantly contributed to the performance of the S&P 500 and Nasdaq.
- The strong earnings reported by Microsoft and Meta in 2025 were accompanied by increased capital expenditure guidance, particularly for AI-related investments.
- The market value of both Microsoft and Meta increased significantly after their earnings calls, indicating investor confidence in the business growth and competitive advantage deriving from AI investments.
- Microsoft and Meta's AI investments have played a key role in their better-than-expected earnings, resulting in their market capitalization reaching over $4 trillion for Microsoft.
- The tech sector has experienced growth not only from the performance of the "Big Tech" companies such as Microsoft and Meta, but also from other AI-focused mid-cap companies in 2025.
- Despite sticky inflation, the Federal Reserve has decided to keep interest rates unchanged, with traders now seeing a 58.8% chance the Fed will stay pat in September.
- In the broader market, the S&P technology index and communication services index have hit record highs, reflecting the positive impact of strong earnings and AI investments in the tech sector.
