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Market Data Table

Breakfast News: AI Spend Splits Meta and Microsoft

July 30, 2026

Wednesday's Markets
S&P 500 7,316 (-1.52%)
Nasdaq 24,443 (-1.74%)
Dow 51,594 (-2.19%)
Bitcoin $63,352 (-0.85%)

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1) Valuation Keeps SpaceX Grounded for Now

Emily Flippen, Team Rule Breakers

When you look at the six signs of a Rule Breaker, it can be easy to misunderstand the assignment, especially when comparing it to SpaceX (NASDAQ:SPCX). Top dog and first mover, check. Considered overvalued by traditional media, check. Past price appreciation, check. And even when we compare it to Chief Rule Breaker David Gardner's own internal check -- does this business meet my vision for a better world in the future? -- it passes. Yet no one here will run to tell you to buy SpaceX shares today. What gives?

The Rule Breaker's philosophy is -- and was -- never about buying great but overvalued businesses. It's about finding opportunities others are overlooking and pricing them for the durable growth they're capable of. SpaceX may be a great company that fits a lot of the traits of Rule Breaker companies, but if its valuation today can't support the long-term growth and potential of its underlying business, it isn't a great investment today. David himself was cool on the SpaceX IPO -- not only because of its mega-size, which could make a 10-bagger more challenging -- but also because of the media circus and outsized risk that its public offering came with. A Rule Breaker worth following isn't automatically a stock worth buying today.

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Chart comparing Meta's and Microsoft's quarterly free cash flow over the past year, with Meta currently at $1.75 billion and Microsoft at $19.64 billion.

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2) Meta Slumps, Microsoft Soars on Earnings Contrast

Meta (NASDAQ:META) fell over 7% in pre-market trading, with Microsoft (NASDAQ:MSFT) rallying more than 8%, as earnings for the tech giants differed sharply, with a focus on capital expenditure (capex) spend and free cash flow.

Meta's free cash flow dropped by 91%: The large spend on artificial intelligence (AI) infrastructure acted as a short-term negative on the stock price, even as CEO Mark Zuckerberg said the company was "at a point where our investments in AI are accelerating every major part of our core business." The market is punishing Meta and rewarding Microsoft for the same behavior -- heavy AI capex -- so the real signal is who can fund the AI build-out without straining cash generation, not the spend itself. For long-term investors, that's not a one-quarter story, but something to play out over the coming years.
"It's the capex story that may be most illustrative of the difference in financial might between these two businesses": The results show an increasing divergence in how AI strategies are playing out. Fool analyst Tim Beyers reflected on this, saying, "Microsoft is making bigger capital investments while still generating plenty of cash." The immediate pre-market gap is a reflection of the reaction to expectations, rather than a concrete verdict. Investors should watch whether AI capex converts into revenue and margin over the next several quarters, and track capex guidance and the free-cash-flow trajectory to identify potential warning signs.

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3) Mixed Fortunes for Recs by Both Team HG and RB

Qualcomm (NASDAQ:QCOM) dropped more than 4% in pre-market trading, partly because quarterly profit missed expectations. The continued diversification effort away from the handset business is taking time to yield results. CEO Cristiano Amon flagged "a challenging memory and supply environment" as another key factor impacting performance. From here, investors will be keeping a close eye on whether memory availability improves in coming months, given the sensitivity of Qualcomm's performance to this factor.
Starbucks (NASDAQ:SBUX) rallied over 4% before the opening bell after the business reported strong results. CEO Brian Niccol attributed the performance improvement to the "Back to Starbucks" turnaround strategy. Management raised its full-year earnings guidance and is projecting same-store sales growth of nearly 6%.
Fortinet (NASDAQ:FTNT) soared over 10% ahead of the market open after results exceeded prior guidance for both revenue and earnings. Revenue grew an impressive 26% year over year to $2.05 billion, with product revenue specifically increasing 52% over the same time period. As CEO Kevin Xie mentioned, the strong performance matters because it "reflect(s) the differentiated value of our innovation in the AI Era." The company also raised its full-year revenue guidance as momentum continues. Since the September 2024 Hidden Gems rec, the stock is outperforming the S&P 500 by 60%.

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4) Hawkish Fed Hold Triggers Market Volatility

Stock market futures were little changed after yesterday's sharp fall late in the session following the latest Federal Reserve meeting. The S&P 500 closed 1.52% lower, with the Nasdaq losing 1.74%, as investors continued to digest when -- and to what extent -- interest rates could be set to rise in the autumn.

Fed Chair Warsh says he got his "good family fight": The split in voters was shown by the 9-3 decision to hold interest rates steady. This matters because it indicates a growing desire to raise rates. Even though Warsh said "there was a larger majority support" to hold rates, he agreed there was more work to be done on taming inflation. Yet he wasn't clear on what would motivate him to increase the rate, with some contradictory comments in his press conference.
"I understand the desire for rolling forecasts and commentary from this committee, but for our part, we need to observe market reaction to developments, direct and unfiltered": Further uncertainty was generated from Warsh ending the practice of forward guidance, meaning investors could be more in the dark on future Fed policy moves. The CME's FedWatch tool currently indicates a 65.2% probability of a 0.25% increase at the September meeting. There is no meeting in August.

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5) Next Up: MA Reports Ahead of Tech Cohort

Mastercard (NYSE:MA) delivers results before the market opens. Recommended by both Team Hidden Gems and Team Rule Breakers, the company is expected to deliver 11.6% revenue growth versus the same period last year -- slowing from last quarter -- backed by stable consumer behavior and demand for cross-border travel.
Roblox (NYSE:RBLX) will release earnings following the market close. Consensus is for a Q2 loss of $0.33 per share, although this would be an improvement from the $0.41 loss year over year. Last quarter saw a strong rise in daily active users. Now, the rapid growth of the over-18 demographic remains a focus for the Team Rule Breakers rec, as these adult users are the highest-monetizing age group for the company.
Apple (NASDAQ:AAPL) reports after the closing bell, marking Tim Cook's final earnings call as CEO before John Ternus takes over in September. Investors will watch for details on memory chip pricing and any potential price increases to offset this after a record previous quarter.
Amazon (NASDAQ:AMZN) also releases earnings in post-market trading. After AI bets started to pay off last quarter, further strong Cloud division growth is expected, with revenue helped by an earlier Prime Day window. In a similar way to Meta, AI capex spend projections is another area to be watched.

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6) Today's Take: Tales From the Drop

The dot-com bubble was the hardest market downturn I've seen. I was a very young investor and before the bubble popped, I used to love checking my portfolio every day. But then my portfolio started to decline every day, for a while. So, I decided to not check it every day. That turned out to be a good strategy that helped me to stay invested. If I could go back and change anything, it would be to add dollar cost average into those terrible days…because that would have really paid off in the long term. -- Alicia Alfiere, Team Rule Breakers

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7) Your Take

How are you feeling about your current portfolio allocation as we approach the end of the month?

Discuss with friends and family, or become a member to hear what your fellow Fools are saying!

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