AI investment boom: Shares of Alphabet and Microsoft surged on Friday following evidence suggesting that investments in artificial intelligence (AI) could yield near-term returns. This contrasts sharply with Meta Platforms' perspective, which sees AI as a long-term investment.

Before the US market opened, Microsoft's shares rose by 3.84 per cent after the company exceeded Wall Street's expectations for third-quarter revenue and profit. This rise is attributed to the widespread adoption of AI across its cloud services.

Google-parent Alphabet saw an even more substantial increase of 11.5 per cent, approaching a market value of over $2 trillion. In addition to surpassing quarterly estimates, Alphabet announced its first-ever dividend and a $70 billion stock buyback plan.

Tech stocks rebound

This positive momentum also lifted the shares of other major tech companies by 1 per cent to 3 per cent, including Amazon.com, Apple, Nvidia, and even Meta Platforms, which had experienced a notable drop in its stock price the previous day due to its indication that AI investments might take years to pay off.

The competition amongst tech giants for generative AI, capable of creating text, videos, and photos from prompts, has intensified. Analysts are divided over whether Alphabet or Microsoft leads in this arena.

According to Wedbush analyst Daniel Ives, Microsoft showcased its dominance in the AI revolution in the latest quarter. However, his colleague Scott Devitt believes that Google's position as a leading AI beneficiary was further validated by the results.

Microsoft's strategic partnership with OpenAI has enabled it to integrate coveted AI technologies across its product portfolio, particularly in Bing, Microsoft 365, and the Azure cloud-computing platform.

Goldman Sachs anticipates that Microsoft will replicate the success of its Azure build-out playbook with its AI-focused suite, while Oppenheimer predicts that Microsoft's AI dominance will resemble that of the PC era, but on a much larger scale.

Google's AI strength

Alphabet CEO Sundar Pichai stressed the importance of Google's AI offerings in enhancing its core search results, describing the company's first-quarter performance as outstanding. RBC analyst Khadijah Gibson noted that Google is effectively managing its AI narrative and weathering concerns related to generative AI.

If premarket gains are sustained, Alphabet will surpass $2 trillion in market value on an intraday basis, a milestone it last achieved three years ago.

With three of the 'Big Six' tech companies having reported quarterly results, Amazon, the remaining one without a dividend, is scheduled to announce its results next week.

Microsoft leads the AI spending spree amongst Big Tech companies, positioning itself as a dominant force in the rapidly evolving AI sphere.

(With Reuters Inputs)