Microsoft's AI Boost Calms Market Nerves Amid Inflation and Rate Concerns

U.S. stocks rose as Microsoft's positive forecasts eased worries about AI spending, while fresh GDP and inflation data kept investors cautious. Microsoft's stock jumped on strong forecasted sales, while Meta faced a 9% drop due to high AI costs. Economic concerns persist amid mixed signals from the Federal Reserve.

On Thursday, U.S. stocks climbed as Microsoft issued promising forecasts that calmed concerns about corporate AI spending, despite investors digesting recent GDP and inflation figures after the Federal Reserve's interest rate decision. The tech giant's stock soared by about 14%, on the back of its forecasted strong current-quarter sales and cloud growth, coupled with capital expenditures falling short of expectations.

Even as Microsoft thrived, other tech companies faced challenges. Meta Platforms saw a 9% decline due to a significant drop in its second-quarter free cash flow, drawing attention to ongoing financial pressures in its AI investments. Despite robust earnings reports, rising AI costs at major tech companies have unnerved investors.

Broader economic concerns linger as U.S. economic growth showed signs of slowing in the second quarter and inflation easing in June, providing mixed signals to investors already grappling with the Federal Reserve's unclear stance on interest rate trajectories.