Sifting through the financial wreckage of last week's pullback illuminates an evolution in the AI trade.

As Big Tech giants reported results this earnings season, Wall Street didn't mind heavy AI spending, but with one key caveat: Everything else in the business had to be humming along.

The big winner of this shift was Meta (META), with its CEO Mark Zuckerberg — fully embracing his post-metaverse, gold chain glow-up — showing that investors won't automatically shy away from massive investments with an uncertain future.

"While we do not intend to provide any quantitative guidance for 2025 until the fourth quarter call, we expect infrastructure costs will be a significant driver of expense growth next year," CFO Susan Li said in a statement.

The warning of bigger AI outlays didn't deter Wall Street.

That's because Zuckerberg and company delivered on the top and bottom lines, flashing financial strength even as they pushed the tech world's boundaries for capital expenditures. Revenue grew 22% in the second quarter and income grew 58%.

And despite losses at its Reality Labs segment reaching $4.5 billion during the quarter, this spending fell to 31% from almost 40% as a share of its total income from operations.

As Zuckerberg told analysts on a conference call last week, "We are in the fortunate position where the strong results that we're seeing in our core products and business give us the opportunity to make deep investments for the future. And I plan to fully seize that opportunity."

But as soon as tech companies confessed some weakness in their core operations, that's when the trouble started. And Meta's peers revealed the flip side of that dynamic.

Reactions to earnings from Alphabet (GOOG, GOOGL), Microsoft (MSFT), and Amazon (AMZN) showed AI investments can become a liability when key business lines fail to meet expectations.

Thursday's report from Amazon, which disclosed a weaker sales and profit outlook, wrapped a wave of Big Tech results that highlighted impatience over massive AI spending.

Cloud rival and AI competitor Microsoft (MSFT) beat expectations on the top and bottom lines but missed on cloud revenue, sending shares lower. Prior to that disappointment, Google parent Alphabet posted lower-than-expected YouTube ad revenue, which also sent investors fleeing.

The key difference — as the broader market contends with last week's bruising jobs report — is that Facebook's parent company dazzled at the basics, making its outsized spending seem like an ambitious proposition instead of a misguided adventure.

For Alphabet CEO Sundar Pichai, AI spending is necessary for such a promising, long-term bet. Underinvesting, in his view, is the riskier path, since the downside is falling behind while the rest of the industry and the world transforms.

But investors and analysts are no longer taking daring AI plans at face value.

Ironically, Facebook's outlandish pivot to the metaverse several years ago serves as a cautionary tale — in 2022, Meta stock fell over 60%.

Skeptics liken the recent frenzy over generative AI to Zuckerberg's prior pet project, which also cost a lot of money and dragged the company's share price into deep water. Wedbush analysts, standing in for AI bulls, say the analogy doesn't fit. They see AI development as a genuine inflection point.

"Is accelerated capex a good or bad thing?" the firm wrote in a note to clients on Friday. "We strongly contrast this is not Meta/Zuckerberg spending on metaverse from 2 years ago, instead this is an AI arms race taking place in the US, China, and around the globe for building out the enterprise and consumer AI ecosystem."

Zuckerberg appears to have learned his lesson, sticking his neck out knowing he's on solid footing with an unstoppable ads machine.

For everyone else talking up their big, expensive AI plans, Wall Street's message is more circumspect: We'll believe you, but show us the money in the meantime.

Hamza Shaban is a reporter for Yahoo Finance covering markets and the economy. Follow Hamza on X @hshaban.

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