Can AI turn a profit? The stock price trends of tech giants this week have provided the market's answer.

If you're looking for the most direct signal that AI investments are beginning to yield returns, this week Wall Street's answer is: observe the performance of cloud computing businesses and stock prices. After Microsoft Corporation (MSFT.US) released its earnings report, its stock soared over 13% in a single day, ending the week up 19%, breaking through $460 from $389; Amazon.com, Inc. (AMZN.US) similarly rose over 15% during the same period, climbing from $231 to $271. Alphabet (GOOGL.US) also saw a 7% increase this week, with its stock rising from $326 to $356, as the market reassessed the AI commercialization value brought by the acceleration of its cloud business; Oracle Corporation (ORCL.US) was similarly boosted by cloud computing expectations, rising over 10% during the same period. However, the market is not indiscriminately favoring AI. Meta (META.US) fell 6% this week, dropping from $593 to $556, due to its ongoing heavy investment in AI infrastructure without possessing a direct monetization channel like cloud computing. NVIDIA Corporation (NVDA.US), as the core of AI computing power, managed only a 2% increase over the week, with its stock fluctuating between $195 and $200, as investors await the earnings report on August 26 to validate the next cycle of AI capital spending. This market trend is forming a clear differentiation: the market no longer rewards merely the scale of AI investment but favors companies that can demonstrate that such investments are translating into revenue, profits, and cash flow. Cloud business surges, and the path to AI commercialization is becoming clearer The quarterly earnings reports from tech giants have sent a clear signal: AI investments are shifting from the capital expenditure phase to realizing revenues. Amazon.com, Inc.'s AWS, Microsoft Corporation's Azure, and Alphabet's cloud business all significantly exceeded market expectations in their second-quarter earnings. AWS saw a year-on-year revenue growth of 37%, Azure grew 43%, and collectively, the cloud business revenues of the three companies grew by 48% year on year. Amid ongoing debates about AI business models, cloud computing has emerged as the most readily verifiable monetization path. The giants are establishing data centers, procuring chips and computing devices, and then providing computing power resources to enterprise clients through long-term contracts, converting infrastructure investment into cash flow returns. Amazon.com, Inc.'s AWS achieved an operating profit margin of 39% in the second quarter. CEO Andy Jassy stated that the average payback period for computing devices is less than three years, while most contracts with AI computing clients exceed five years, suggesting that current investments come with a longer revenue realization timeline. The resulting income, free cash flow, and return on invested capital are very compelling, said Jassy, who proposed a long-term vision for AWS to potentially grow into a business with $1 trillion in annual revenue. In comparison, FactSet data shows analysts currently expect AWS's revenue to be around $170 billion this year. AI demand is becoming the core driver of cloud business growth. The industry's bottleneck has shifted from "is there demand?" to "is the computing power sufficient?" The agreement AWS reached in April with Anthropic, valued at over $100 billion with a ten-year term, exemplifies the explosive demand for AI computing power. Meta's predicament: heavy investment, but lacking cloud computing revenue Compared to Microsoft Corporation, Amazon.com, Inc., and Alphabet Inc. Class C, Meta faces a greater market challenge. This social media giant is also investing heavily in AI infrastructure but lacks a mature cloud computing business, unable to generate revenue directly from leasing computing power like AWS, Azure, and Google Cloud. Since the release of its second-quarter earnings report, Meta's stock has fallen by about 5%. The company previously raised its capital expenditure expectations for 2026, with CEO Mark Zuckerberg indicating that Meta is considering building its own cloud computing business, although it currently lags far behind the three major cloud providers. Wall Street is forming an increasingly clear judgment standard: the key to AI investment is not the scale of investment but whether the company has a business model that can convert capital expenditure into sustained cash flow. Cloud computing stands out as the most mature answer currently, while companies lacking this commercialization path are facing greater scrutiny. Profit quality is becoming the core test for tech stocks in the next phase Despite the strong earnings performance of tech giants, the market's reaction to the earnings reports has shown differentiation. Goldman Sachs Group, Inc. data shows that in the TMT sector, companies with above-expectation EPS saw an average underperformance of about 192 basis points against the S&P 500 on the day following their performance announcement; in contrast, comparable companies in non-TMT sectors outperformed by about 75 basis points. This indicates that the market's pricing logic for tech stocks is changing: investors are no longer solely focused on whether short-term performance exceeds expectations; they are increasingly emphasizing the sustainability and sources of profit growth. In the second quarter, the overall EPS growth tracking value for the S&P 500 reached 45% year on year. Of this, approximately 19 percentage points came from the "other income" category of about $151 billion in equity investments from Alphabet and Amazon.com, Inc., while Microsoft Corporation contributed another $3 billion. Excluding these factors, core profit growth still reached 26%, the fastest level since 2021. Currently, AI infrastructure-related companies have contributed about one-third of the S&P 500's EPS growth in the second quarter. Analysts expect this proportion may exceed 50% by the second half of 2026 and into 2027. However, cost pressures remain a concern for the market. Over the past few quarters, the median profit margin for S&P 500 companies has essentially stagnated, and profit margin expectations across most industries have been downgraded for the future. Goldman Sachs Group, Inc. continues to maintain an end-of-year target level of 8,000 points for the S&P 500, projecting that S&P 500 EPS will reach $385 by 2027. Regarding the AI market, future market focus will shift from the speed of capital investment to the sustainability of profit growth.