This is The Takeaway from today’s Morning Brief, which you can sign up to receive in your inbox every morning along with:

The Chart of the Day

What we’re watching

What we’re reading

Economic data releases and earnings

For a while, strong quarterly financial results from Big Tech would quiet concerns over lavish AI spending. But now, a new paradigm is emerging: a phase where excellence reflects and justifies AI investments.

Just a few quarters ago, Wall Street tolerated ballooning capital expenditures as long as the main operation was doing well. But that storyline has evolved. Now, the core business and AI costs are blurring together.

A powerful dynamic working in tech companies’ favor is that it’s becoming difficult to disentangle their flagship products from all their multi-branched AI initiatives and spending. That’s not to suggest that tech titans are engaging in sleight-of-hand accounting or misleading eager investors.

Rather, it’s pointing out that for the most part, we won’t see some bolded line item called AI PROFITS on their income statements. What we do see, what Wall Street celebrates, and executives anticipate, are bigger numbers for advertising and cloud services. That’s a technological feat. And it’s also a financial one.

Sign up for the Yahoo Finance Morning Brief Subscribe By subscribing, you are agreeing to Yahoo’s Terms and Privacy Policy

Microsoft’s impressive Azure performance came largely from non-AI demand as companies moved their storage to the cloud. But as UBS analyst Karl Keirstead suggested in a note Thursday, Microsoft is likely getting a boost from its infrastructure buildout.

Meta, too, basking in a double-digit post-earnings glory, benefits from its AI investments. As Morningstar analyst Malik Ahmed Khan wrote in a note after earnings, enthusiasm for the company comes from Meta’s ability to use AI tools to fuel more engagement and better monetization on its platforms.

Integrating new AI tools into the whole business is by design. From a technological perspective, the enormous benefits of boosted productivity and creative potential can resonate throughout an entire company. But as more teams, workflows, and products rely on AI, how can investors or anyone, really, draw a line where the legacy operation ends and AI investments begin?

Wall Street bulls and tech CEOs insist that generative AI is a paradigm-shifting technology. As Meta CEO Mark Zuckerberg said in a post earlier this week, “It seems clear that in the coming years, AI will improve all our existing systems and enable the creation and discovery of new things that aren’t imaginable today.”

If the technology is as transformational as its advocates would have us believe, trying to distinguish the fruits of AI from traditional systems would be as strange as trying to separate out technology enchanted by the internet from pre-web computing.