DoorDash, Duolingo show Wall Street doesn’t love AI spending equally

This earnings season, companies across the tech sector have told Wall Street to brace for increased spending as the AI ​​boom accelerates.

But while investors heavily reward mega-majors for their rising capital spending forecasts or ignore their guidance, companies outside the trillion-dollar club are punished.

Door Indicator, Duolingo And roblox saw their stock prices fall in double digits last week after companies said spending was on the decline and concerns about future profitability grew. Unlike tech giants that promise large investments to meet the growing demand for AI services and workloads, smaller companies are viewed with more skepticism; analysts are uncertain whether their bets will pay off and result in significant new revenue opportunities.

“Investors don’t like investment cycles,” Evercore ISI’s Mark Mahaney told CNBC’s “Closing Bell: Overtime” last week. “That’s what happens with all the companies that go in and out of this earnings cycle and negatively surprise the market by saying, ‘We really want to move into investments first,'” he said.

DoorDash’s shares tumbled 17% on Thursday; This was the food delivery platform’s worst decline as a publicly traded company in five years. DoorDash said in its third-quarter earnings report that it plans to spend “several hundred million dollars” on new products and technologies next year.

“We wish there was a way to turn a baby into an adult without investment or see a baby grow into an adult overnight, but we don’t believe that’s the way life or business works,” the company wrote in its earnings release.

DoorDash recently increased its investments in autonomous delivery with the launch of Dot in September, spending a combined $5.1 billion on restaurant reservations platform SevenRooms and British food delivery service Deliveroo.

CEO Tony Xu said in the earnings call that the company’s investment history signals “there’s been some success in replicating this playbook, and we’re doing it now for future growth.”

Analysts look at this differently.

“Looking ahead, we maintain our Hold rating until there is more clarity on how long investments may have an impact on margins as we see multiple expansion opportunity as limited,” analysts at Gordon Haskett wrote.

A DoorDash spokesperson said in a statement that the company is “fortunate to have an increasingly successful core business” and takes a “disciplined investment approach” to new projects.

Duolingo also had its own unique feature. We had our worst day as a public company on Thursday, despite declines in revenue and bookings in the third-quarter earnings report.

The stock lost a quarter of its value after Duolingo said it was prioritizing finding new users and is now down 41% for the year. Company pour money AI features like an interactive video calling option when trying to win over paying subscribers.

“There are experiments pitting monetization against user growth, and part of my job has always been to arbitrate between the two,” CEO Luis von Ahn told CNBC after the earnings report. He said the company is changing the “tradeoff towards more user growth.”

In the earnings call, von Ahn said it “will take some time before we see the results, the financial results, of the long-term investments we’ve made.”

Following the report, analysts at KeyBanc Capital Markets downgraded the stock from buy to the equivalent of hold, citing concerns that increased investment would put pressure on near-term bookings, earnings and valuation.

“This tells us it may take several quarters to see more meaningful financial benefits,” the firm said.

Duolingo had no comment.

Meanwhile, the biggest companies in the tech industry may be years away from seeing whether their similarly big AI bets will turn a profit. But investors aren’t too worried.

Alphabet And Amazon Both rebounded after reporting earnings in late October. Companies have once again raised their capital spending forecasts for the year, suggesting there will be no slowdown in 2026.

Amazon Web Services is a leading provider of cloud infrastructure, a market in which Google ranks third, and is racing to build data centers to meet expected demand for AI-related computing capacity. AWS and Google are also investing in their own silicon to be less reliant Nvidia and can offer customers a more complete technology stack.

Microsoft, which ranks second in the cloud infrastructure market, fell after its earnings report included guidance on higher capital spending. But the company, valued at close to $4 trillion, still has mostly Wall Street’s backing as it competes for more AI deals and larger workloads.

Exception between megacaps MetaIt fell 11% after earnings. The company expects to spend as much as $72 billion on capital expenditures this year, but it doesn’t sell a cloud service that rivals Amazon, Google and Microsoft.

While Meta says it is injecting AI into its product portfolio and improving targeting in its core advertising business, a lack of clarity around revenue is giving investors pause. Mahaney grouped Meta with companies that he said have “adversely surprised” the market.

Roblox was also in this category.

Shares of the online gaming platform fell almost 16% on October 30 after the company warned that higher spending on security and infrastructure could hit margins. CEO David Baszucki told CNBC’s “Squawk on the Street” that security is the “number one priority” on its platform.

Finance chief Naveen Chopra said the investments may weigh on short-term attendance and bookings but are a “magnifier of long-term growth”.

Analysts at Benchmark downgraded the shares from buy to hold, thinking that the investments would hinder profitability. Roth analysts who recommend holding the stock also see a potential hit to margins next year.

“The impact of these initiatives may negatively impact platform engagement in the near term, but is expected to provide a greater long-term benefit for users,” analysts at Roth wrote.

Roblox had no comment for this story.

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