Stock manias are not a zero interest rate phenomenon

Shares of air taxi maker Joby Aviation are down more than 14% in premarket trading after the company announced a $1 billion capital raise after the bell Wednesday.

Joby, which in December said it would invest in equipment, facilities, and employees to double its aircraft production output by 2027, is offering convertible senior notes due 2032.

According to reporting by Bloomberg, the notes are being offered with an up to 30% conversion premium. Bloomberg reports that the company is pricing its share offering between $11.35 and $11.75, representing up to a 15% discount on the stock as of Wednesday’s close.

Joby ended its third quarter with $978.1 million in cash and cash equivalents, down slightly from its second quarter. Its shares have risen 62% over the past 12 months, compared to a more than 14% loss for its rival Archer Aviation in the same stretch.

Two hyperscalers. Two top- and bottom-line beats. Two different reactions.

When both companies issue capex guidance that’s higher than expected and one goes up and the other goes down, it’s difficult for me to argue that the capex outlook is the key driver of either market reaction.

So here’s a smattering of potential reasons for the divergent paths of Meta and Microsoft since releasing quarterly earnings reports after the close on Wednesday, which has seen the former rally while the latter gets crushed:

• Microsoft cloud growth is slowing; Meta’s top line is poised to accelerate.

  • Azure revenues were up 38% year on year in constant currency terms, a modest sequential slowdown since Q2 2025, and management’s guidance for growth of 37% to 38% in the current quarter implies this trend is likely to continue.

  • The midpoint of Meta’s guidance for revenues between $53.5 billion and $56.5 billion this quarter would mark an acceleration to sales growth of 30% year on year. Since the AI boom started, its high-water mark for sales growth has been 27%.

• Customer quality and concentration matters:

  • While Microsoft enjoyed solid ex-OpenAI growth in its remaining performance obligations, that one customer is still responsible for 45% of commercial RPO. Look at Oracle to get a glimpse of what investors think about firms whose AI build-outs use OpenAI demand as scaffolding.

  • Meta’s lack of a cloud business has been an oft-cited negative about the aggressiveness of its build-out. The company arguably has to work harder than other hyperscalers to turn that spending into sales growth. And... that’s happening.

• Initial conditions matter:

  • There was probably a little more embedded pessimism on Meta than Microsoft heading into these reports. As of Wednesday’s close, it was the only member of the Magnificent 7 to trade lower over the past 12 months.

Cheers to Duncan Weldon, VKMacro, and George Pearkes, whose back-and-forth on Bluesky inspired this post.

Microsoft’s chief financial officer, Amy Hood, just offered some intel that severely undercuts Michael Burry’s argument against AI stocks, albeit with one big caveat.

If you’ll recall, the hedge fund manager turned Substacker of “The Big Short” fame said that tech companies were understating depreciation charges — that is, how fast GPUs lose their value over time, in a bid to artificially juice profits.

During Microsoft’s conference call on Wednesday, the CFO was asked how the company will be able to capture enough revenue over the six-year useful life of the hardware to justify the outlays. Her response:

“The way to think about that is the majority of the capital that we’re spending today and a lot of the GPUs that we’re buying are already contracted for most of their useful life,” she said. “And so a way to think about that is much of that risk that I think you’re pointing to isn’t there because they’re already sold for the entirety of their useful life.”

The implication here is that not only will these chips make money for as long as tech companies expect they will, but that their useful economic life might actually be longer than that, not shorter.

This tidbit is obviously positive for the hyperscalers, which are spending hundreds of billions on these GPUs. But it’s probably even more of a relief to neoclouds that are even more dependent on these chips being able to generate cash. That’s (mostly) all there is to their businesses, unlike megacap tech giants.

It also corroborates commentary from one such neocloud, CoreWeave, on how well these processors retain value.

“For example, in Q3, we saw our first 10,000-plus H100 contract approaching expiration,” CoreWeave CEO Michael Intrator said after the firm’s most recent earnings report. “Two quarters in advance, the customer proactively recontracted for the infrastructure at a price within 5% of the original agreement.”

And per Silicon Data, H100 rental rates have firmed significantly since the end of November.

However, I’d be remiss not to point out a potential fly in the ointment here: one reason that Microsoft’s GPUs are contracted for most of their useful life is thanks to demand from OpenAI, which accounts for 45% of its commercial remaining performance obligations.

And, if Oracle’s shown us anything, it’s that customer concentration and quality matters.

Investors have taken billions in market cap away from ServiceNow, and CEO Bill McDermott would very much like for it to be returned.

During the conference call that followed Q4 earnings on Wednesday, McDermott tried to reassure investors that the company’s recent M&A efforts weren’t made to latch onto lines going up in hopes of distracting from any looming deterioration in its core business:

“I wanted to make it very clear to the investors, I hear you, and we did not and never have bought an asset like many others have — and I know that’s probably why it’s on your mind — because we needed the revenue. What we needed is the innovation and the expanded growth opportunity of a great TAM [total addressable market] and a customer base that’s waiting for us. And as it relates to future M&A, we do not have a large scale M&A on the road map...

So, probably it was a little bit what’s going on over there at ServiceNow, and I noticed that we lost about $10 billion in market cap on that because of the worry. So now the worry is gone, you can give us back the market cap. And no, we’re not going after anything large. We now have them in the family and we’re going to grow them like we do everything else.”

McDermott attributed the downdraft in ServiceNow to its recent acquisitiveness. And it’s true that the stock did tumble upon reports that the company was acquiring cybersecurity firm Armis (which came on the heels of its Veza acquisition), then dipped again when the deal was announced at an even higher price than previously rumored.

Interestingly, McDermott was actually understating the pain on the call, or at least has a very generous return policy: the stock shed nearly $21 billion in market cap on December 15, the session it got dumped following reports around the potential Armis acquisition.

NOW has fallen more than twice as much as the iShares Expanded Tech Software ETF since December 12 through Wednesday’s close. More broadly, the software cohort has been branded with the equivalent of a scarlet letter by traders as of late, amid concerns that it’ll be disintermediated by AI tools and agents. In particular, Claude Code’s development of Cowork has been hailed as a “ChatGPT moment repeated” that threatens to disrupt large swaths of the industry.

Wedbush Securities analyst Dan Ives removed ServiceNow from his list of top 30 AI stocks at the start of December, saying that its AI monetization has been slower than anticipated so far.

ServiceNow is lower in premarket trading despite reporting top- and bottom-line Q4 beats in results that were broadly applauded by the analyst community, along with better-than-expected Q1 guidance.

That’ll be even more market cap that McDermott will likely want back.