Microsoft Spent Its Way Out of a Correction. Meta Just Spent.

Wednesday the Nasdaq Composite closed 10.1% below its June 1 high, the textbook definition of a correction and the kind of number that earns its own chyron. Thursday it rose 2.78% to finish 7.6% off the high, so the chyron went away. A correction that lasts one sleep is less a market signal than a mood swing with a ticker symbol.

Microsoft's fiscal fourth quarter did the one thing missing from every AI spending story this year: it showed money coming back. Revenue hit $90.01 billion, up 18%, earnings landed at $4.81 a share, and Azure grew 43% while crossing $100 billion for the full fiscal year. The stock closed up 15.51% at $451.10, which at this size is less a rally than a re-rating with a running start.

The number that actually moved people was remaining performance obligation, the pile of contracts customers have signed but Microsoft has not yet delivered or billed. It grew 84% to $678 billion. That is not a forecast or a slide with an arrow on it. It is a backlog, and a backlog is the rare corporate figure you cannot talk yourself into.

Meta reported the same night with a genuinely good top line, $60.8 billion and up 28%, comfortably past what analysts wanted. Then it raised the floor of its 2026 capital spending guidance, the money it lays out for data centers and chips rather than salaries, to $135-$145 billion. The low end alone jumped $10 billion in one quarter, which is the corporate version of telling your spouse the renovation is only slightly over budget while a second excavator turns into the driveway.

Earnings came in at $6.18 a share against the $7.22 Wall Street penciled in, and free cash flow, the money left after the building is paid for, fell to $784 million from $8.55 billion. The stock dropped 7.95% to $539.03, worst of any megacap on the board.

Our Take: Nobody punished Meta for spending. They punished it for spending without a $678 billion backlog to point at. Same religion, same collection plate, and the market has quietly started checking receipts at the door.

Micron rose 18.36% to $874.66 and AMD rose 13.00%, which both look like triumphs until you notice each is still red for the week. Micron sits 2.8% below Monday's close, AMD 1.9%, because both spent Monday through Wednesday getting dismantled by ChangXin Memory Technologies, a Chinese DRAM maker that listed in Shanghai and closed its debut up 466%. That is the market announcing a fourth competitor by air horn.

Thursday the read-through flipped, because memory is no longer a semiconductor sidebar. It is line-item inflation inside everybody else's earnings. Amazon raised its capex guide and named higher memory costs doing it, and Apple guided next quarter's gross margin down and said memory explains more than all of the decline. Tim Cook called it "a 100-year flood on the memory pricing," strong language from a man whose company has spent a decade making suppliers cry.

Our Take: The AI trade always had a bottleneck, and for three years everyone assumed it was GPUs. The scarce thing turns out to be the boring rectangle that feeds the GPU, and the bill now lands in the margin guidance of a phone company that does not build data centers.

Second quarter GDP from the BEA came in at 1.5% against the 2.1% economists expected, a real miss. Real consumer spending inside the same report ran 3.2% against an expected 0.4%. So the American consumer spent like the rent is theoretical and headline growth still came up short, which means the shortfall arrived from somewhere other than the checkout line.

The inflation half was equally split-brained: the quarterly GDP price index ran 6.3% against 3.6% expected, hot enough to sting, while June core PCE, the gauge the Fed actually targets, rose 0.1% on the month and cooled to 3.3% annually. Claims came in at 197,000 against 200,000 expected, the labor market once again declining to participate in anyone's recession thesis. All of it landed a day after Chair Kevin Warsh's Fed held rates at 3.50%-3.75% on a 9-3 vote, with all three dissenters voting to raise. The VIX fell 17.28% anyway.

The earnings are already moving without you. Amazon and Apple both reported after Thursday's close. Amazon posted $200.6 billion in revenue, up 20%, with AWS accelerating to $42.2 billion, then raised 2026 capex to roughly $220 billion and blamed memory. Its headline EPS of $5.75 against a $1.82 estimate is not a 215% beat, it is a sign the two numbers are measuring different things, so read the AWS line instead. Apple beat on revenue ($109.42 billion) and earnings ($2.02), then guided September gross margin down to 47-48%. Both were indicated sharply pre-market, in opposite directions.

The calendar, all times CT:

Already out: Chevron reported $12.1 billion in quarterly earnings, $6.11 a share. Buried in the release is the detail worth your coffee: a 20-year deal to supply 2.67 gigawatts of dedicated power to a Microsoft data center in West Texas. The oil major's growth story now includes moonlighting as a utility for a software company.

The one thing that could ruin everyone's day: that 9:00 AM Michigan number. Consumers expect 4.6% inflation a year out and the survey is supposed to show it cooling to 4.2%. If it does not, three Fed officials who already voted to hike get to spend the weekend being right in public.

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Microsoft and Meta spent the same money on the same religion on the same night. One brought a signed contract, the other brought a vision. Only one of those is legal tender.

Nothing here is investment advice. We are a newsletter, not your fiduciary, and the only position we hold is that the memory shortage will be somebody's problem for longer than anybody has priced in.