A new dotcom bubble? Al hype has yet to translate into profits

The top two tech firms are worth twice the rest of the FTSE 100 combined but valuations haven't turned into revenues, write Patricia Clarke and Katie Riley

- Patricia Clarke and Katie Riley

It has been a bumper quarter for big tech. Microsoft and Meta each added half a trillion dollars in market value to their stocks after reporting strong earnings, and are now worth twice as much as the entire FTSE 100 index combined. The previous week, Google’s parent company, Alphabet, reported a 14% increase in revenue.

These results are something of a Rorschach test. For some, they suggest that big tech’s huge investments in AI technologies may be starting to reap rewards. Meta has said its capital spending this year will be between $66bn (£48bn) and $72bn, Alphabet is raising its 2025 capex forecast to $85bn and Microsoft’s spending is above analysts' expectations. “The bumper week has clearly done a lot to reassure those who were nervous that capital has been allocated in a very free fashion,” said Russ Mould, an analyst at investment platform AJ Bell.