The tech sector had mixed earnings results, with notable reports from Microsoft, Meta, and Tesla. **Microsoft** did well by exceeding revenue expectations, but its shares dropped 5% after hours. While the overall numbers looked strong, the company expects declines in earnings and revenue growth by 2025. Critics pointed out that its big investments in AI haven’t significantly boosted earnings, with capital expenditures reaching $37.5 billion. **Meta**, in contrast, saw its shares jump more than 8% after reporting revenues and forecasts that beat expectations. The company plans to increase capital expenditures on AI to $135 billion, a move investors welcomed thanks to its strong ad revenue. Unlike Microsoft, Meta doesn’t face capacity constraints and is determined to meet ambitious AI objectives, attracting more investor interest. **Tesla** shares rose by over 3%. Even though car sales decreased, the energy storage division performed well, and a weaker dollar worked in its favor. The company is focusing on expanding its cyber taxi business and investing in AI, aiming to transform from just a car manufacturer into a broader technology player. With lower capital expenditures of $2.39 billion, Tesla positions itself as a contender in the AI space while signaling potential recovery in stock prices. The Q4 2025 earnings reports show that the market is punishing companies for substantial AI spending that doesn’t quickly improve profitability. Microsoft’s stock decline reflects investor impatience despite strong overall results. This scenario could lead traders to consider buying puts or creating bear call spreads on Microsoft, anticipating continued disappointment. The stock’s 5% drop to around $425 has increased 30-day implied volatility to about 35%, raising options premiums. Since the company indicated that data center issues may not improve until the latter half of 2026, we could see sideways or downward movement in stock prices. Selling covered calls against long positions might be a wise way to earn income while waiting for the AI investments to pay off. In sharp contrast, **Meta** is being rewarded for its AI investments because its growing advertising business offsets costs. The stock surged over 8% in after-hours trading to just under $555, indicating strong bullish sentiment. This momentum makes strategies like buying call options or putting together bull put spreads appealing in the coming weeks. With the significant price rise, implied volatility has increased, making outright call purchases costly. Instead, traders might consider selling cash-secured puts at a strike price where they would be comfortable owning the stock, such as $520. This strategy lets them earn a hefty premium while maintaining a bullish to neutral perspective. **Tesla** presents a more complex situation. The market responded positively to its earnings beat and shifting narrative. The 3% price increase reflects cautious optimism as it’s increasingly recognized as an AI and energy company, not just a car maker. This shift, combined with lower capital expenditures than competitors, might support the stock price. After a tough start to 2026, with the stock below $240, this earnings report could serve as a recovery catalyst. Given Tesla’s historically high volatility, selling out-of-the-money puts for February or March 2026 expirations could be an effective way to collect premium, betting that the evolving AI narrative will stop the stock from dropping significantly further.

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