Corporate investment in artificial intelligence is rapidly reshaping capital spending patterns, and investors are showing clear preferences about which balance sheets they trust to turn big bets into profit. The latest results from two of the largest technology companies revealed truly eye-catching spending: Microsoft disclosed capital expenditures of nearly $38 billion for the quarter, a rise of roughly two-thirds from a year earlier, while Meta raised its planned capital spending for the year by 73% to a range between $115 billion and $135 billion.
Despite similar narratives of heavy investment, investors reacted in markedly different ways. Market value of Microsoft fell by about $240 billion following the disclosure, a decline larger than the entire market capitalisation of Citigroup. Meta, by contrast, saw its market value climb by about $140 billion after it upgraded its earnings outlook, a move that appeared to reassure shareholders about the pay-off from higher spending.
Those moves highlight a fundamental market tension: one firm’s costs can become another firm’s revenues. For example, Samsung Electronics reported a trebling of operating profits, driven by stronger demand and higher prices for memory chips. What was once a low-interest segment of the semiconductor market became a source of outsized revenue when supplies tightened.
Central bank policy and economic commentary added another dimension to market behavior. The Federal Reserve left policy unchanged at its Wednesday meeting, an outcome widely anticipated, and Chair Jerome Powell’s post-meeting comments were notable for an upbeat tone. He said the economy was on a "solid footing" and described the outlook as "clearly improving." Powell also noted there was "broad support" on the committee for holding rates steady, aside from two members who voted for a cut.
In his remarks, Powell said the Fed had already done a lot of "normalising" to rates and assessed policy as only "somewhat restrictive," or even "loosely neutral." Markets interpreted that language as removing the prospect of an April rate cut, and pricing left June as the first likely cut with about a 61% probability in part because investors assume President Trump will have found a more dovish replacement as chair by then.
Powell declined to commit to a timetable for his own tenure, saying he would not be drawn on whether he would step down as a Fed governor in May or remain through 2028. When asked by a reporter why he might want to leave given perceived threats to Fed independence, he responded with a smile.
Currency markets showed pronounced movements despite official assurances. Treasury Secretary Bessent insisted the United States still follows a "strong dollar" policy, regardless of comments from the White House. Still, the dollar looked vulnerable in market trading, and European voices registered concern about the euro’s appreciation against the dollar. Some EU and ECB officials have murmured that a stronger euro could hurt exports and pose a downside risk for inflation.
Actual intervention by the European Central Bank appears unlikely, given its more reserved history. The Swiss National Bank, however, has greater precedent for stepping in, and the franc has been pushed up broadly as capital fled the dollar, appreciating even against the euro. The franc has broken below what market technicians regard as large chart support levels, a move that likely worries Swiss policymakers.
Intervention by the SNB can complicate global flows because it typically sells francs to buy euros, and then distributes some of those euros into dollars, sterling and other currencies. That pattern produces cross-currents across currency pairs and can add volatility to already stretched markets.
Market participants will be watching several scheduled releases and events that could move prices on Thursday, notably euro zone consumer confidence and business sentiment for January, a Riksbank policy meeting and remarks from ECB board member Piero Cipollone, and in the United States, November trade data plus weekly jobless claims.
Key developments to watch:
- Euro zone consumer confidence and business sentiment for January
- Riksbank policy meeting and remarks from ECB board member Piero Cipollone
- U.S. November trade data and weekly jobless claims