(Reuters) - Disappointing quarterly results from Microsoft ( MSFT ) melted $340 billion of stock market value on Tuesday from it and rival heavyweights racing to dominate artificial intelligence technology, while Nvidia ( NVDA ) and other AI chip sellers rallied after results from Advanced Micro Devices ( AMD ).

The gains in chipmakers and losses in their biggest customers underscored a divide in the AI landscape, with investors recently questioning whether Wall Street's AI rally may have become overextended.

"Microsoft ( MSFT ) reported some deceleration in its core cloud business, but a huge increase in capex. That represents a transfer of wealth from Microsoft ( MSFT ) shareholders to Nvidia ( NVDA ) shareholders," said Gil Luria, senior software analyst at D.A. Davidson.

In its report after the bell, Microsoft ( MSFT ) said revenue from its Intelligent Cloud unit - home to the Azure cloud-computing platform - jumped 19% to $28.5 billion in the quarter ended June 30, but missed analysts' estimates of $28.7 billion, LSEG data showed.

Its capital expenditure, including finance leases, jumped 78% in the quarter to $19 billion, with Microsoft ( MSFT ) saying it needs to expand its global network of data centers and overcome capacity constraints to meet AI demand.

Meta Platforms ( META ) dropped about 3%, while Amazon ( AMZN ) lost 2.8% following Microsoft's ( MSFT ) results. Apple ( AAPL ), Alphabet and Tesla were each down about 0.5%.

Investors are impatient to see more results from massive investments in AI, said Daniel Morgan, senior portfolio manager at Synovus Trust.

"That's what messing up the whole thing. The stocks traded way up in anticipation of these reports," Morgan said.

The growing cost of the AI arms race added to investor fears after Alphabet last week also reported a greater than expected rise in capex to support its generative AI technology.

Technology companies have faced high expectations going into this earnings season. Analysts on average see technology companies in the S&P 500 growing their aggregated earnings by almost 10%, according to LSEG I/B/E/S.

Worries that the cost of building AI infrastructure has ballooned -- and lifted revenue less than expected -- have helped pull the Nasdaq down 8% from its record high close on July 10, as of Tuesday's close.

The Nasdaq lost over 1% on Tuesday ahead of Microsoft's ( MSFT ) report.

While Microsoft's ( MSFT ) results dragged other Big Tech companies lower, AMD rallied over 6% after it forecast third-quarter revenue above market estimates, banking on demand for its AI chips staying strong.

Shares of Nvidia ( NVDA ), whose processors are the gold standard in AI computing, rose 2.6%. Broadcom ( AVGO ), which also sells AI-related chips added 1.4%. Intel ( INTC ) and Qualcomm ( QCOM ) each added almost 1%.

"We're still in a tough macro environment. AI is absolutely real, but requires a lot of investment and that is visible in the capex numbers," said Rishi Jaluria, an analyst at RBC Capital Markets.