To The Moon

Tonight brings two major market tests at the same time.

The Federal Reserve will announce its rate decision at 2:00 p.m. ET, followed by the press conference at 2:30 p.m. ET. After the U.S. market closes, $Microsoft(MSFT)$ and $Meta Platforms(META)$ will report earnings. (联邦储备系统)

One event will shape the valuation investors are willing to pay for growth stocks.

The other will determine whether Big Tech’s enormous AI spending can still support those valuations.

Put simply:

The Fed sets the valuation ceiling.
Microsoft and Meta test the AI earnings floor.

Test No. 1: The Fed decision

The Fed entered this meeting with its benchmark rate at 3.50%–3.75%. Holding rates steady remains the base case among economists, although persistent inflation and recent energy volatility have kept the possibility of a hike alive. Reuters described this as one of the most uncertain Fed decisions in years. (联邦储备系统)

The headline decision matters, though the language may matter even more.

Scenario A: Hold rates and sound measured

This would be the most supportive outcome for technology stocks.

If the Fed keeps rates unchanged and signals that it wants more data before tightening again, Treasury yields could ease and high-valuation growth stocks may receive some breathing room.

Potential beneficiaries:

$Invesco QQQ Trust(QQQ)$
$iShares 20+ Year Treasury Bond ETF(TLT)$
$Microsoft(MSFT)$
$Meta Platforms(META)$
$NVIDIA(NVDA)$

Scenario B: Hold rates with a hawkish warning

This is a more complicated outcome.

The Fed could leave rates unchanged while stressing inflation, tariffs and energy prices. That would preserve the possibility of a future hike and keep longer-term yields elevated.

For AI companies, a hawkish hold still carries a cost.

Data-center investment is already consuming more cash. Higher yields raise financing costs and reduce the present value of earnings expected far into the future.

Scenario C: Deliver a surprise hike

A rate increase would be a low-probability, high-impact result.

The market would have to reprice the dollar, Treasury yields, technology valuations and the economic outlook at the same time. Semiconductor and other crowded AI trades could experience another sharp round of volatility.

The main point tonight:

A hold alone may not be enough. The market needs to hear how concerned the Fed remains about inflation and whether another hike is still under active consideration.

Test No. 2: Can Microsoft show the receipts?

Microsoft will publish its fiscal fourth-quarter results after Wednesday’s market close. Options are pricing a move of roughly 6.6% in either direction, equivalent to a potential market-value swing of around $190 billion. That is considerably larger than Microsoft’s average move around recent earnings reports. (Source)

The size of that implied move reflects a major change in investor expectations.

The market has already seen the spending.

Now it wants evidence that the spending is producing revenue, adoption and cash flow.

1. Can Azure stay near 40% growth?

Azure is the clearest test of whether AI infrastructure is translating into demand.

Investors will watch cloud growth, capacity constraints, enterprise contracts and the amount of new business connected to AI workloads.

Strong Azure growth would support the view that customers are actively paying for the infrastructure Microsoft has built.

A slowdown alongside another large increase in capital expenditure would revive concerns that capacity is growing faster than monetization.

2. Are customers paying for Copilot?

Microsoft has several potential AI revenue channels:

Azure sells computing capacity.

Microsoft 365 Copilot adds AI subscriptions to workplace software.

GitHub Copilot monetizes coding assistance.

Security, databases and business applications can also charge for AI features.

Tonight, investors will want measurable evidence:

Are more companies purchasing Copilot seats?
Are customers expanding contracts?
Is AI improving renewal rates or average revenue per user?
Are enterprises using Microsoft’s ecosystem or choosing outside providers?

3. How much more will Microsoft spend?

Microsoft’s fiscal third-quarter capital expenditure rose 49% year over year to $31.9 billion. Tonight may provide the first meaningful indication of how aggressively the company plans to invest during fiscal 2027. (Reuters)

For Microsoft shareholders, higher capex creates pressure on depreciation, margins and free cash flow.

For the supply chain, continued investment supports demand across:

$NVIDIA(NVDA)$
$Taiwan Semiconductor(TSM)$
$Broadcom(AVGO)$
$Arista Networks(ANET)$
$Marvell Technology(MRVL)$
$Vertiv(VRT)$
$Micron Technology(MU)$

The ideal combination is straightforward:

Azure growth stays strong, AI adoption expands, capex remains high and cash generation holds up.

Test No. 3: Can Meta’s advertising machine fund the AI buildout?

Meta will also report after the market closes. Its options imply a post-earnings move of around 7.8%, showing that investors expect another volatile reaction. (Reuters)

Meta entered the quarter with strong operating momentum.

In Q1, revenue rose 33%, ad impressions increased 19%, and the average price per ad increased 12%. The company generated $12.39 billion in free cash flow during the quarter. (Meta)

The pressure comes from the size of its next investment cycle.

Meta previously raised its 2026 capital-expenditure outlook to $125 billion–$145 billion, citing higher component prices and additional data-center spending for future capacity. (Meta)

Tonight’s report needs to answer three questions.

1. Is AI still improving the advertising business?

Meta’s clearest AI return currently comes from Facebook and Instagram.

Recommendation systems can increase engagement.

Advertising models can improve targeting and conversion.

Better performance can support ad prices and advertiser demand.

If those metrics remain strong, investors may accept higher capex as an investment that strengthens Meta’s existing profit engine.

2. Will Meta raise capex again?

This may be the most sensitive number in the report.

Alphabet recently showed that even explosive cloud growth may fail to satisfy investors when spending rises faster and free cash flow weakens.

If Meta raises capex, the market will expect stronger advertising growth, clearer cost benefits or new AI revenue streams in return.

3. Can Meta monetize AI beyond advertising?

Investors will also look for progress across:

Meta AI usage
Model and API revenue
Smart glasses and wearables
Custom AI chips
External computing services
Enterprise AI products

Advertising remains the financial foundation. These additional businesses need to show a credible path toward becoming more than future possibilities.

Meta’s result will affect a broad supply chain:

$Broadcom(AVGO)$
$Taiwan Semiconductor(TSM)$
$Micron Technology(MU)$
$SanDisk(SNDK)$
$Corning(GLW)$
$Vertiv(VRT)$
$Eaton(ETN)$

Why tonight matters for the entire AI market

Investors have raised the standard for AI companies.

Strong revenue is required.

Guidance needs to remain strong.

Capital spending can continue rising.

Cash flow, margins and returns still need to hold together.

That is why Microsoft and Meta can move far more than their own stocks.

If both companies report accelerating AI revenue, healthy core businesses and manageable cash-flow pressure, demand across chips, memory, networking, power and cooling receives another major confirmation.

If capex rises again while monetization or cash flow disappoints, the market may continue reducing the valuations of the entire AI infrastructure chain.

TigerComments Take

Tonight’s market setup can be reduced to two questions:

How expensive will money remain?

That answer comes from the Fed.

Can AI revenue grow faster than AI spending?

That answer comes from Microsoft and Meta.

The most constructive outcome would be:

• The Fed holds rates without becoming more hawkish

• Azure remains near 40% growth

• Copilot adoption improves

• Meta’s advertising engine stays strong

• Capex remains high while cash flow stays healthy

The most difficult outcome would be:

• The Fed keeps the possibility of another hike firmly on the table

• Microsoft and Meta raise spending again

• AI revenue, margins or free cash flow fail to keep pace

After tonight, the market may finally decide whether the recent AI correction has already reset expectations—or whether the capital-return stress test is only beginning.

What are you watching most tonight?

A. The Fed’s rate decision and policy tone
B. Microsoft Azure and Copilot monetization
C. Meta advertising growth and capex
D. Whether the AI hardware chain rebounds together

Which result matters more for the next market move: the Fed’s message, or Microsoft and Meta proving that AI spending is paying off?

Disclaimer: This post is for market discussion only and does not constitute investment advice. Investing carries risk.