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Former Fed Governor Kevin Warsh is Trump's pick for fed chair.

David Paul Morris / Bloomberg via Getty Images

Key Takeaways

• Incoming Federal Reserve Chair Kevin Warsh is likely to push for lower interest rates in the short term, but it's an open question whether he will get them.
  
• Over the long run, Warsh may keep interest rates higher than some of the other candidates considered for the job.
  
• Warsh's experience as a Fed governor could help him establish credibility in the role.
  

President Donald Trump's selection of former Federal Reserve governor Kevin Warsh to chair the Fed could instill confidence in financial markets that an experienced hand is at the helm. However, it could ultimately lead to a significant reshaping of the central bank and lower interest rates in the short run.

Warsh has experience on Wall Street and one major qualification in Trump's eyes: a recent history of advocating for the Fed to lower its key interest rate. He has also frequently criticized the way the Fed does business, and analysts expect him to overhaul several aspects of its operations.

Several experts said the selection of Warsh was better for the central bank's credibility than other names floated for the position, who had closer ties to Trump. That could bolster public confidence in the Fed at a time when its independence from the White House is in question.

What This Means For The Economy

The Fed could keep interest rates higher under Warsh's tenure than if another of Trump's front-runners took the job: that could mean lower inflation and a cooler economy down the road, a prospect that sent stocks and precious metal prices lower and the dollar higher Friday.

Warsh Could Favor Rate Cuts In The Short Term

Financial markets expect that, under Warsh, the Fed will likely lower its key interest rate at the outset of his four-year term, which would begin in May. Several analysts said he could be less inclined to rate cuts after that, however, given his history as a "hawk" who has typically favored higher rates to push down inflation.

"Kevin Warsh has spoken out in favor of lower interest rates, but he is a pragmatist who won’t want to lose market trust by making cuts that aren’t warranted," Heather Long, chief economist at Navy Federal Credit Union, wrote in a commentary. "His long history of concern about inflation suggests that he won’t allow the economy to overheat."

Few experts expect Warsh to undertake the kind of steep rate cuts Trump has demanded from the Fed in recent months.

"It’s not clear that Warsh would be in favour of an aggressive easing of monetary policy," Richard Flax, chief investment officer at Moneyfarm, wrote in a commentary. "During the financial crisis, he was apparently concerned about the aggressive quantitative easing that the Fed undertook—fearing the potential impact on inflation."

Warsh's ability to steer the Fed toward modest rate cuts could be limited. Warsh must win over a majority of the Fed's 12-member Federal Open Market Committee to make any moves. The Fed's leadership has been divided about whether to cut interest rates to boost the job market or keep them higher for longer to fight inflation.

"If anything, it is an environment where building consensus is harder and where the new Chair’s power is likely weaker, not stronger than usual," Jake Krimmel, senior economist at Realtor.com, wrote in a commentary. "In short, given the complicated macro environment Warsh is facing, the outspoken FOMC he is inheriting, and the unusually politicized circumstances from which he is emerging, Warsh may find it more difficult to win over new colleagues and voters in ways his recent predecessors did not, which could mean less clear guidance from the Fed and noisier signals for markets."

Credibility For The Fed

Given Warsh's experience at the Fed during the financial crisis, he may bring some gravitas to the job. Warsh, a lawyer by training and former executive at Morgan Stanley, was widely regarded as the Fed's liaison to the world of finance during the 2008 crash, when Ben Bernanke was chair.

"With five years of history on the Board of Governors under the Bernanke Fed, Kevin Warsh was known as Bernanke’s bridge to Wall Street," Jeffrey Roach, chief economist at LPL Financial, wrote in a commentary. "Warsh is also known as a critical thinker and should have no problem getting confirmed. He will not likely act as a yes-man."

Financial market participants seemed to be reassured by Warsh's selection on Friday.

"He’s likely to stay close to market players again and want to ensure he keeps the market’s trust," Long wrote. "This is likely why the U.S. dollar is firming and gold and silver are falling on news of his nomination."

Keeping The Balance

Although Warsh is experienced, that doesn't mean it will necessarily be business as usual for the central bank. He is a longtime critic of the Fed's leadership and could bring about institutional changes. In particular, he could scale back the bank's use of its balance sheet, that is, its buying and selling of securities to manage financial markets.

"Warsh has been consistently critical of the Fed’s active use of its balance sheet over the past ~15 years," economists at Deutsche Bank led by Chief Economist Matthew Luzzetti wrote in a commentary. "This has earned him the label of a 'hawk', at least with respect to the Fed’s balance sheet."

Warsh Will Take Office At Crucial Time For The Fed

Whatever is on Warsh's agenda, experts said his first step will likely be to establish his credibility for keeping the Fed independent and his determination to keep inflation in check. That commitment could be tested immediately, assuming Trump continues his persistent political pressure on the bank to rapidly cut interest rates.

"As with any Fed chair, Warsh will have to earn market trust and credibility around his commitment to achieving the inflation target," Porcelli wrote. "These bona fides always need to be earned by an incoming chair. The requirement could be more acute in the current context, with inflation well above target for five years and the President’s calls for steep Fed rate cuts."

Update, Jan. 30, 2025: This article has been updated after publication to include fresh comments from experts after Warsh's nomination.

Kevin Warsh served as a Fed governor between 2006 and 2011.

Tierney L. Cross/Bloomberg via Getty Images

Key Takeaways

• President Donald Trump has selected former Federal Reserve Governor Kevin Warsh as his nominee to be the next chair of the Federal Reserve after Jerome Powell's term ends in May.
• Warsh has argued for lower interest rates, and as Fed chair, will be in a position to influence them.
  

President Donald Trump has selected former Federal Reserve Governor Kevin Warsh to be the next chair of the central bank.

Warsh, who served as a Fed governor between 2006 and 2011, beat out several finalists for the job, including Trump economic advisor Kevin Hassett and BlackRock executive Rick Rieder. Warsh will take over as Fed chair after Jerome Powell's term expires in May, assuming he is confirmed by the Senate.

"I have known Kevin for a long period of time, and have no doubt that he will go down as one of the GREAT Fed Chairmen, maybe the best," Trump wrote in a social media post Friday morning.

The chair of the Federal Reserve is one of the most influential jobs in the economy, responsible for leading the U.S. central bank and heading the 12-person committee that sets monetary policy. The Fed is responsible for keeping inflation low and employment high, mainly by adjusting borrowing costs via the fed funds rate.

What This Means For The Economy

If Warsh maintains his views of the economy after taking office, the central bank could be inclined to keep interest rates lower than it otherwise might. That could lead to lower borrowing costs, a hotter economy, and possibly higher inflation.

Notably, Warsh has argued for lower interest rates but was not considered the most "dovish" among the leading candidates for the job, analysts have said. The Fed trimmed the fed funds rate by three-quarters of a point last year to a range of 3.5% to 3.75%, but has resisted cutting it more because of concerns about inflation.

Fewer IRS workers and changes to the tax code could lead to delays for those who need assistance this filing season.

James Carbone / Newsday RM via Getty Images

KEY TAKEAWAYS

• An IRS watchdog organization warned that taxpayers who struggle to navigate tax law changes may face delays this filing season.
• Changes to the tax law and the introduction of new tax breaks from the "One Big, Beautiful Bill" Act are expected to lead to more errors in tax returns and calls to the IRS customer service.
• Yet, with the tax agency's significant layoffs and numerous leadership changes in 2025, IRS agents may be overwhelmed.

Changes in tax law and significant layoffs at the IRS may result in delays for some taxpayers this filing season.

The Taxpayer Advocate Service, an independent watchdog within the IRS, said in its annual report to Congress on Wednesday that most taxpayers are expected to have a smooth 2026 filing season. However, those who require help from the IRS or filed their tax return incorrectly could experience delays and problems.

"The success of the filing season will be defined by how well the IRS is able to assist the millions of taxpayers who experience problems," wrote National Taxpayer Advocate Erin M. Collins in the report.

Why This Matters

While this tax year is expected to bring more trouble due to tax law changes, it could also provide most taxpayers with increased tax savings and larger refunds. It is important for taxpayers to receive their refunds quickly, especially as inflation continues to pressure many households' budgets.

The Hurdles The IRS Faces This Year

During 2025, the federal government laid off 27% of IRS workers and the agency went through numerous leadership changes. In particular, last year, the IRS had seven different commissioners. Currently, Scott Bessent, who also serves as the Secretary of the Treasury, is the acting IRS commissioner.

In addition, the IRS said it needed to hire 3,500 new customer service representatives to handle phone calls from taxpayers with questions. Yet the tax agency didn't meet its goal, the Taxpayer Advocate Service said, and is 1,000 employees short.

The smaller workforce at the IRS is particularly troublesome now that taxpayers are seeing many significant tax law changes coming from the "One Big, Beautiful Bill" Act.

"The IRS has taken steps to avoid these problems, provide guidance, implement changes to its forms and instructions, and program its systems for the OBBB Act," wrote Collins. "However, it all comes down to how well taxpayers themselves will understand the OBBB changes and if they can correctly file their taxes and claim the new deductions this year."

The "OBBB" Act introduced more than 100 changes to the tax code, including several new tax deductions and credits, such as those for tips, overtime and seniors. Historically, in tax years after major tax changes, there were increased errors in returns and more taxpayers contacted the IRS for help, Collins wrote.

The 2026 filing season is also the first year the IRS is shifting away from paper checks and sending out most refunds virtually. Tax returns that do not include information to set up a direct deposit will be frozen until the taxpayer provides their bank information or requests a paper check.

This likely means IRS employees, some of whom also handle taxpayer phone calls, will need more time to resolve problems with taxpayers' filings.

"These changes will place additional strain on IRS systems and employees at the very moment when staffing levels have been significantly reduced, heightening the risk that the 2026 filing season will be more difficult, frustrating, and costly for taxpayers, practitioners, and the IRS," wrote Collins.

Gold prices wobbled a bit on Thursday but remained above $5,400.

Michael Nagle / Bloomberg via Getty Images

Key Takeaways

• Some strategists think gold prices could theoretically rise more than 50% from current levels, which as of late Thursday were well above $5,400 an ounce.
• A measure of investor appetite for gold: The metal has outperformed bitcoin over five years.

Gold is looking more and more like the new bitcoin.

While bitcoin was dubbed "digital gold," it's analog gold that has seen its price mostly go up these days. Meanwhile bitcoin—after doing little for weeks—on Thursday slid almost 7% to below $84,000, its lowest point since November, according to Messari.

It's likely that gold, which today fell in morning action but recovered and remains above $5,400, saw some profit-taking Thursday—to be expected, given that the haven asset has more than doubled over the last year. What's eating bitcoin is harder to tell. Yet, between traders chasing gold's rally, and investors seeking safety in it, the precious metal has clearly become the favorite.

WHY THIS MATTERS TO YOU

Bitcoin was supposed to a multi-use tool for investors, at once a momentum trade and a hedge. Neither appear to be selling points for investors lately as they pile into gold instead.

Gold's recent run-up has helped it surpass bitcoin's performance over the past five years.

More recently, investors until about July were parking money in both bitcoin and gold ETFs, playing what is called the "debasement trade," an expression of general investor anxiety whether it's about the declining dollar or persistently high government debt. That inflows into gold and silver ETFs toward the end of last year coincided with outflows from bitcoin ETFs, showed which investors preferred, according to JPMorgan.

"Retail investors continue to favour precious metals over bitcoin," JPMorgan global markets strategist Nikolaos Panigirtzoglou and his team wrote in a Wednesday note.

That preference can translate to a meaningful rise in household gold holdings, which the firm estimates could rise from 3% of overall portfolios now, to 4.6% in the next few years. That higher level would imply gold prices at $8,000 to $8,500, JPMorgan wrote.

Investors are meanwhile stepping away from bitcoin in a range of ways. Ned Davis Research this week booted bitcoin and digital assets form its Trump Trade Index: The iShares Bitcoin Trust (IBIT) and ARK Blockchain & Fintech Innovation (ARKF) ETFs, the latter which holds stocks like Coinbase (COIN) and Circle (CRCL), are out of the index, though an allocation to gold via the SPDR Gold Trust (GLD) remains.

"Crypto seems to have taken a lower priority for the administration and the Clarity Act, which should clarify federal regulation authority for digital assets, has stalled in the Senate," Pat Tschosik, the firm's chief thematic strategist, and Philippe Mouls, wrote in a note yesterday.

Caterpillar shares have gained more than three-quarters of their value in the last 12 months

David Paul Morris / Bloomberg / Getty Images

Key Takeaways

• Caterpillar shares rose to close at a record high on Thursday, as the company's fourth-quarter results topped estimates.
• Demand for equipment and construction machinery to build out AI data centers has boosted Caterpillar's results in recent quarters.

America's construction and farming equipment giant Caterpillar has become a big beneficiary of the AI boom.

Shares of Caterpillar (CAT) climbed 3.4% to close at a record high above $665 Thursday, after the company posted quarterly results that topped estimates, thanks in part to strong demand for machinery and equipment to build out AI data centers.

The latest gains extend a blistering rally for Caterpillar's stock that's seen the shares surge 16% in January so far. They've added more than three-quarters of their value over the past 12 months, making Caterpillar the Dow Jones Industrial Average's top performer over the period.

Why This Is Significant

Growing demand for equipment used to build out AI data centers has helped offset negative impacts on Caterpillar's margins from the Trump administration's tariffs. Its stock gains illustrate how the AI boom has lifted shares from a wide range of industries, and AI's far-reaching impact on the market.

Caterpillar on Thursday morning reported an adjusted $5.16 per share on a 18% year-over-year rise in revenue to $19.1 billion for the fourth quarter. Both figures topped analysts' projections compiled by Visible Alpha.

Sales in the company's construction industries segment grew 15%, while the power generation portion of Caterpillar's power and energy division that makes large engines and generators used to power data centers saw revenue surge 44%.

CEO Joe Creed said during Thursday's earnings call that Caterpillar expects investments in data centers "will further bolster overall construction spending" this year, according to a transcript from AlphaSense.

Wall Street analysts are somewhat divided on whether Caterpillar's stock has room to rise, however. Though ratings are still in flux, the nine analysts with current ratings tracked by Visible Alpha are split between five "buy" and four "hold" ratings. With Thursday's gains, the stock has climbed past their mean target around $662.

President Donald Trump addressed housing issues in a speech at the World Economic Forum.

Chip Somodevilla / Getty Images

Key Takeaways

• President Donald Trump has said he wants to make housing more affordable without causing significant declines in home values.
• Economists said Trump seems focused on lowering mortgage rates, not housing prices.
• They questioned whether a strategy focused on lower borrowing costs would significantly address affordability issues.

When President Donald Trump has talked about his recent proposals to make housing more affordable, he's focused on one particular cost: mortgage rates.

He also made clear that he doesn't want to hurt housing prices. It’s part of an effort to make homeownership more affordable without driving down housing values. 

“I am very protective of people that already own a house,” Trump said. “Because we have had such a good run, the house values have gone up tremendously, and these people have become wealthy.”

And in remarks on Jan. 29 at a cabinet meeting, Trump went even further, saying he wanted to see home values increase, but stressing the importance of interest rates in housing costs.

“I want for those people, those millions of people that own houses, we're going to drive those values up,” Trump said. “But we're also going to try making it easier for people to buy. The best thing that can happen for both groups of people is lower interest rates, and those interest rates are coming down.”

But whether housing affordability can be meaningfully improved without lowering home prices has raised questions among some economists.

Why This Matters To The Economy

Housing affordability affects whether families can buy homes, build wealth, and feel financially secure, while also shaping broader economic growth by fueling consumer spending. Protecting existing homeowners’ wealth can support spending and markets, but may leave high prices as a long-term barrier for new buyers.

In his speech last week to the World Economic Forum in Davos, Trump said that adding housing supply would lower home prices and disrupt the market by eroding the housing wealth that many homeowners have accumulated since values soared after the pandemic. However, he said that lower interest rates were “good for everybody.”

“This suggests that the administration sees lower mortgage rates as the preferred channel through which to improve affordability,” wrote Wells Fargo economists Charlie Dougherty and Ali Hajibeigi.

Homeowners are naturally wary of declining property values.

“As a homeowner, I don't want to see the value of my property go down,” said Florida Gulf Coast University Economics Professor Shelton Weeks. ”Ultimately, that bit of pain for other homeowners is the pathway to truly alleviating the housing affordability crisis.” 

Trump Policies Target Mortgage Rates

So far, many of Trump’s key housing-market announcements have focused on borrowing costs.

His instructions for government-backed mortgage giants Fannie Mae and Freddie Mac to purchase $200 billion in mortgage bonds have helped nudge borrowing costs lower. An idea to create longer 50-year mortgages could also give homebuyers more borrowing options.

But lower mortgage rates would probably boost demand. 

“Unless new listings pick up substantially, the lack of supply is likely to drive up prices, offsetting much of the affordability gain from lower mortgage rates,” wrote Nationwide Senior Economist Ben Ayers.

Housing Values Help Support Consumer Spending

Higher home values can boost the broader economy. An increase in housing wealth can help spur homeowners to spend more, something economists call the “wealth effect.” 

“Because a home is often the largest source of family wealth, price swings can materially impact how people spend, save and borrow,” the Dallas Federal Reserve wrote in a report this month.

So far, housing wealth has helped keep consumer spending going strong, something Trump would like to see continue, given that it accounts for more than two-thirds of U.S. economic activity. Consumer spending rose 0.3% in both October and November, according to data from the Bureau of Economic Analysis.

“Affluent consumers continued to buoy spending with an extra boost from wealth effects,” wrote Diane Swonk, chief economist at KPMG.

Trump Looks at Investor Purchase Rules, Immigration Enforcement to Boost Supply

If the government implements policies that increase housing supply, it could drive down home prices.

More homes would give buyers more options. But home sellers may have to lower their prices, potentially undercutting overall home values, which are up 57% since 2020, according to Zillow data.

“Every time you make it more and more and more affordable for somebody to buy a house cheaply, you're actually hurting the value of those houses, obviously, because the one thing works in tandem with the other,” Trump said. “And I don't want to do anything that's going to hurt the value of people that own a house.”

However, Trump has proposed at least one measure to increase supply. His executive order last week to ban large institutional investor purchases sought to target Wall Street's ownership stake in the housing supply.

But the limits on institutional investors will only affect a relatively small 2.5% share of the market, Wells Fargo wrote, and may not have enough reach to have a big impact. 

“The order only appears to erect hurdles for additional home sales to investors and does not look to be an outright ban,” Wells Fargo wrote. “There is no mention of completely stopping new sales, or mandating the liquidation of existing portfolios.”

Update, Jan. 20, 2026: This article has been updated with new comments from President Donald Trump.

Tesla has begun telling investors how many subscriptions to its $99-a-month "FSD" system it has.

David Paul Morris / Bloomberg via Getty Images

Key Takeaways

• Tesla this week detailed how many active subscriptions to its "FSD" self-driving software product it has for the first time.
• The number is important to Tesla, but also CEO Elon Musk, whose pay is in part tied to whether the company can get it to 10 million from around 1 million at present.

Is Tesla's self-driving software selling? Investors can now see for themselves.

The EVs-and-more company last night reported its latest financial results, sharing news that has the shares drooping on a down day for stocks. Tesla (TSLA) also shared a number of updates on changes to its business—including the decision to scrap two car models in favor of factory space to build robots, but also the addition of a line item about how many active subscriptions it has for its "FSD" product.

That decision follows the Magnificent Seven company's move to shift the product from a one-time purchase to a subscription, which bears the promise of recurring revenue but passes on larger one-time payments.

Why This Matters to Tesla Investors

Tesla has long sold its self-driving software via a one-time payment. Now, as it's shifting to subscriptions, it's begun detailing those sales—which, by the way, is a key metric in CEO Elon Musk's efforts to get full benefit of his pay package.

The company on Wednesday reported 1.1 million active subscriptions as of the end of 2025, up from 1 million at the end of Q3 and 800,000 at the end of 2024. (Most of the current subscriptions are still of the one-time variety, making that an inflection point likely to be watched closely. FSD revenue, meanwhile, wasn't broken out.)

FSD currently sells for $99 per month, according to Tesla's web site. That price, Musk has said, is likely to rise.

Tesla's latest quarterly release also highlights progress toward operational metrics that are part of the company's massive new compensation plan for Musk. One of those metrics is active FSD subscriptions, with a target of 10 million.

Shares of Tesla were recently down more than 3% as broader markets, pulled lower by tech weakness, retreated. Read Investopedia's full coverage of today's markets here.

Meta and Microsoft both spent more on AI infrastructure than Wall Street expected last quarter.

Michael Nagle / Bloomberg via Getty Images

Key Takeaways

• Shares of Meta soared after it demonstrated AI investments are paying off in its advertising business, while Microsoft slumped as key indicators of AI-driven growth lagged expectations.
• Meta and Microsoft are both on track to dramatically increase their spending on AI infrastructure, which some experts say could exceed $700 billion this year.

Investors appear to be over AI spending. They want to see AI earnings.

Meta Platforms (META) stock soared Thursday after the social-media giant said revenue growth is accelerating thanks to its massive investments in artificial intelligence. Meta’s capital expenditures—what it spends on property and capital equipment, including data center hardware—were up 50% in the fourth quarter of 2025, and are expected to increase by more than 90% this year.

Meta’s AI spending far exceeded Wall Street’s expectations, but so did top- and bottom-line growth, which investors attributed to AI-driven improvements in its core advertising business. Ad revenue grew 24% in the fourth quarter, driven by an 18% increase in impressions and a 6% increase in average prices. Meta forecast revenue would grow even faster in the current quarter—up to 33.5%, its fastest rate since 2021, when the company took in half the revenue it does today. 

Why This Is Important

Big Tech's AI spending has fueled growth at a variety of AI hardware companies, and at times been a boon to cloud providers' stocks as well. Though after years of massive spending on data centers, investors are increasingly demanding evidence that AI investments are paying off.

Wall Street analysts agreed on Thursday that Meta’s revenue growth offset skepticism about its expenses. “AI is driving returns, and more for Meta than peers,” wrote Bank of America analysts. JPMorgan analysts said the report “could put Meta back on track toward earning the right to invest” in AI infrastructure after spooking Wall Street with its capex plans last quarter. 

Microsoft (MSFT) stock, on the other hand, plummeted Thursday, as investors focused on disappointing growth in what Morgan Stanley analysts called “key indicators of GenAI fitness.” 

Microsoft’s Azure cloud computing platform grew 38% in constant currency last quarter, beating official estimates by one percentage point but falling just short of Wall Street’s expectations. Microsoft 365 revenue growth held steady in the mid-teens, disappointing investors hoping to see benefits from the rollout of AI Copilot. 

Those results made Microsoft’s soaring capital expenditures—up 66% from the prior year—a tough pill to swallow. CFO Amy Hood said capex is expected to decline sequentially in the current quarter “due to the normal variability from cloud infrastructure build-outs.” Nonetheless, the company’s spending is still expected to grow faster this fiscal year, which runs through June, than last year, when it increased more than 60%. 

The hyperscalers—Microsoft, Meta, Alphabet (GOOG), Amazon (AMZN), and Oracle (ORCL)—are expected to spend at least $500 billion on infrastructure this year, though some experts say spending could exceed $700 billion. That spending has fueled meteoric growth of AI's "pick-and-shovel" makers, like Nvidia (NVDA), Micron (MU), and Sandisk (SNDK).

Meta Platforms, run by CEO Mark Zuckerberg, center, is being rewarded by investors for its latest results.

Lexie Moreland / WWD via Getty Images

Key Takeaways

• Meta Platforms beat Wall Street estimates across metrics, showing how its AI efforts are paying off; it also guided some first quarter metrics above consensus expectations.
• The news fired up investors, with the Magnificent Seven stock trading at 2026 highs.

Meta Platforms is the only company in the Magnificent 7 living up to the name today.

Shares of the social media giant were recently up more than 9% on Thursday, and at year-to-date highs, after last night's fourth-quarter earnings report last beat Wall Street estimates across metrics, suggesting that its efforts in artificial intelligence are paying off.

Investors rewarded Meta (META) for the news: Its stock is among the top gainers in the S&P 500, and it's the only member of the group of seven big U.S. tech stocks climbing. The rest—Nvidia (NVDA), Alphabet (GOOGL), Microsoft (MSFT), Amazon.com (AMZN) and Tesla (TSLA)—were mostly sliding, while Apple (AAPL) was clinging to small gains.

WHY THIS MATTERS TO THE AI-TRADE

Meta's latest earnings report is helping revive some of the lost optimism around the AI trade—showing that the billions spent to develop those capabilties can bear fruit in the near future.

Upbeat sentiment around Meta is pushing analysts to produce glowing reports and raise their price targets, distributing optimistic perspectives on its efforts to raise engagement and improve monetization with the help of machine-learning. All 24 analysts tracked by Visible Alpha have a buy rating on the stock; their mean price target, $868, implies upside of 20% from recent prices.

"We have a balance of new things that we're trying to do, while also investing very heavily in making sure that all of the work that we're doing in AI improves both the quality and business performance of the core apps and businesses that we run there," said CEO Mark Zuckerberg on Wednesday, per a conference-call transcript provided by AlphaSense.

Meta's fourth quarter earnings per share of $8.88, beat Visible Alpha estimates of $8.24. Revenue for the quarter hit $59.9 billion, above estimates for $58.4 billion. The company's revenue guidance for the quarter started in January, of $53.5 billion to $56.5 billion, also beat Street expectations. It plans to roll out a number of new AI models and products this year.

"Meta has the potential to monetize its AI assistant, Meta AI across several use cases, including AI agents for businesses, deeper automation of advertiser tools & creative, and ongoing integration of genAI capabilities into Meta hardware products," Wedbush's team, including Scott Devitt and Dan Ives, wrote in a report Thursday. They raised their price target on the stock to $900 from $880 previously.

Meta's AI capabilities and planned rollouts is eliciting optimism from analysts as they extrapolate future growth potential from the recent quarter. Meta AI, its multilingual virtual assistant integrated across the Facebook, Instagram, and WhatsApp as well as its Ray-Ban glasses, reached over one1 billion monthly active users.

Morgan Stanley analysts led by Brian Nowak said Meta's engagement and monetization improvements in the fourth quarter, as well as its plans to continue raising the bar, gives them "confidence" that its revenue growth will accelerate going forward. They raised their price target on the stock to $825 from $750. Jefferies analysts raised their price target by $90 to $1,000.

The company's capital expenditure guide for this year—$115 billion to $135 billion—exceeded Street estimates of around $110 billion, likely raising some eyebrows. But based on investors' reaction today, Meta's work is getting the green light.

Correction: Meta's capital expenditure guide for the year is $115 billion to $135 billion. An earlier version of this article incorrectly stated the range.

Microsoft revealed that nearly half of its backlog was attributable to OpenAI.

David Paul Morris / Bloomberg / Getty Images

Key Takeaways

• Microsoft shares slumped Thursday, despite quarterly revenue and earnings that topped estimates.
• Analysts said the tech giant's growing AI spending, weaker-than-expected cloud growth, and reliance on a few large customers raised concerns.

Microsoft (MSFT) shares took a big hit after the company reported earnings yesterday.

The shares dropped 10% Thursday to close at $433.50, leading losses on the Dow Jones Industrial Average and the Nasdaq. Thursday's rout wiped nearly $360 billion off Microsoft's market capitalization, the second-largest loss on record, topped only by Nvidia's nearly $600 billion crash during last January's Deepseek panic. (Read Investopedia's full coverage of today's trading here.)

While Microsoft's quarterly revenue and earnings topped analysts' estimates, worries about the tech giant's cloud growth, coupled with its rising spending on AI and reliance on a few large customers, weighed on the shares.

Why This Matters to Investors

As Microsoft and many of its Big Tech peers have boosted spending on AI infrastructure, they've also faced a higher bar to impress investors with their growth.

Morgan Stanley analysts said that while growth from Microsoft's Azure cloud narrowly beat the company's guidance, it grew slower than many on Wall Street anticipated.

During the company's earnings call, CFO Amy Hood stressed that Microsoft’s cloud growth has been held back by capacity constraints, and that Microsoft is investing in building out its AI infrastructure to meet demand, but its higher-than-expected spending has added to concerns.

Microsoft also revealed that nearly half of its backlog was attributable to OpenAI. Jefferies analyst Brent Thill said on CNBC following the results that the detail underscored worries about concentration risks and OpenAI's ability to pay its hundreds of billions of dollars in commitments.

Still, Jefferies and Morgan Stanley said they said they see gains ahead for the shares. Though analysts' ratings are in flux, most have bullish ratings for Microsoft, with 14 of the 15 analysts tracked by Visible Alpha calling the stock a "buy," compared to one neutral rating. Their average price target around $598 would imply nearly 40% upside from Thursday's close.

Update—January 29, 2026: Stock prices in this article were updated after markets closed on Thursday.