Tech giant Microsoft has announced positive quarterly financial results, but coupled with Alphabet’s earnings data, the numbers left investors unimpressed and wiped off $190B in market value for AI-related companies.

On Jan. 30, Microsoft and Alphabet (Google’s parent) published their earnings for the previous quarter, specifically highlighting the developments in the sphere of AI and cloud computing.

Microsoft witnessed accelerated sales in the last quarter of 2023, with its AI tools being a major growth driver. The company revenue rose 18% year-on-year from September to December to reach more than $60 billion.

Although these indicators beat analysts’ estimates, Microsoft stock fell 0.7% in extended trade following a brief intra-day record high reached earlier on Tuesday.

The decline is partly linked to the financial results of another tech giant – Alphabet. Its quarter ad revenue missed investor expectations, despite leaning on its AI integrations as a key factor in Q4 operations. We must note that some of the AI features like generative AI services for Google Cloud clients and AI model Gemini were released only in December 2023.

Google’s parent reported a consolidated revenue of $86 billion for Q4, up 13% year-over-year. Nevertheless, the company’s shares went down by a considerable 5.6%.

As reported by Reuters, the unimpressive AI-driven performance affected not only the two companies in question, but also other AI-related businesses.

Chipmaker Advanced Micro, known for sales of AI processors, saw its shares decrease 6% after the forecast for the quarter revenue missed estimates. Shares of Nvidia which surged earlier fuelled by AI optimism, also went down over 2%.

The estimated overall market cap loss of the leading AI companies equals $190B.

The sharp contrast between positive quarterly results and negative market value trends points to the fact that investors placed too much hope in corporate profitability linked to AI implementation. Microsoft and Google were in the spotlight of the AI development space in 2023, both releasing their AI chatbots.

Although both firms see positive implications of incorporating AI across their tech stack, their market valuations went over the rooftop driven by a bit of unrealistic AI expectations. For instance, unparalleled optimism about AI helped Microsoft’s stock market value surpass $3 trillion this month, substituting Apple as the most valued public company. As lofty expectations meet the real figures, the corporate valuations become more moderate.