As big tech giants are spending hundreds of billions of dollars on artificial intelligence (AI), investors are still concerned about whether this hefty investment would pay off or not.

It comes as quarterly results from leading tech giants like Alphabet's Google, Microsoft, Meta, and Amazon are all due on Wednesday.

Huge investments in AI:

Experts weigh that the results will gauge if the sky-high spending on AI has driven enough growth in cloud computing and advertising to justify the ‌cost.

The four companies are on track to pour around $600 billion into AI this year, a historic outlay that has squeezed cash flows and tested Wall Street's patience, even as their stocks have largely held up on expectations of future gains.

Funding that race has consequences. Amazon and Instagram-parent Meta has announced job cuts affecting thousands of workers, while Microsoft has come up with its first employee buyout program in more than five decades.

"What investors are looking for—us included—is what's the return is on all the capital expenditure (capex)," said Joe Maginot, large-cap portfolio manager at Madison Investments, which holds shares in Alphabet, Meta, and Amazon.

"Obviously, it takes time, but ... these have been businesses that generated significant amounts of free cash flow, and today, pretty much all operating cash flow is being consumed in capex. So, the economics of the business are changing."

That shift will be scrutinized in cloud results.

Growth is expected to accelerate modestly across the sector in the January‑to‑March quarter: Amazon Web Services likely grew 25%, Microsoft Azure is expected to have risen 40% and Google Cloud 50.1%, compared with 23.6%, 39%, and 47.8%, respectively, in the prior quarter, according to data from Visible Alpha and LSEG.

Cloud companies see revenue boost as AI splurge holds up:

Overall revenue growth remains robust as Alphabet's sales are expected to rise 18.7% to $107.06 billion, while Amazon is expected to increase 13.9% to $177.30 billion and Microsoft by 16.2% to $81.39 billion.

Meta will likely post a 31% sales jump to $55.45 billion, its fastest growth in more than four years, as its AI bets improve ad targeting and reach and the social media giant benefits ‌from its strong position in the digital market.

Microsoft faces strong scrutiny:

The stakes are especially high for Microsoft as its stock has lagged rivals and ended the January-March period with its worst quarterly performance since the 2008 financial crisis, while other Big Tech companies posted gains.

Chart shows the share price performance of Microsoft, Meta, Alphabet and Amazon

Once seen as the early leader of the AI race, investors fear Microsoft has failed to convert its vast clientele of business customers into paying Copilot users.

Only 3.3% of its more than 450 million enterprise customers subscribe to the $30 a month AI assistant.

At the same time, AI tools from Microsoft's partners such as Anthropic are threatening to displace the traditional software that has long been the company's cash cow. Microsoft is attempting to turn that threat into advantage by weaving rival AI models deeper into its own ecosystem.

Microsoft's landmark tie-up with OpenAI, which helped drive billions of dollars in cloud demand from customers seeking access to ChatGPT, has also lost its exclusivity.

While the Satya Nadella-led company will receive a guaranteed 20% cut of OpenAI's revenue through 2030 under a new agreement, OpenAI is now free to work with competing cloud providers such as Amazon.

"The company is going to have to speak about why their business model isn't going to get meaningfully disrupted in AI and why their investments with OpenAI, their relationship with OpenAI is going to enable them to remain competitive," said Melissa Otto, head of research at S&P Global Visible Alpha.