By Laura Matthews

NEW YORK, July 29 (Reuters) - Options traders expect a roughly $190 billion swing in Microsoft's market value after it reports earnings on Wednesday, an unusually large move that underscores investors' growing eagerness to see if billions of dollars in ‌AI spending are beginning to pay off.

The tech company's options imply a move of about 6.6% in either direction after the ‌company reports fourth-quarter results. By comparison, over the last 12 earnings cycles, Microsoft has averaged a 4.8% implied move and a 4.4% actual move, Option Research & Technology Services (ORATS) data ​showed.

The significantly higher pricing this quarter suggests that investors view Microsoft — one of the hyperscalers whose massive AI capital spending is at the heart of this year's AI rally and the broader bull market — as central to the AI earnings story.

With the AI trade now faltering, investors who flocked to technology stocks are growing wary of ever-rising costs.

At their current trajectory, the hyperscalers are expected to spend more combined on capital expenditures than they generate ‌in free cash flow by 2027, Reuters reported last ⁠week.

"The market is looking for results," said Seth Hickle, chief investment officer at Mindset Wealth Management. "This earnings season is about AI execution, not AI enthusiasm."

Microsoft's shares have fallen 18.7% this year, while the S&P 500 is up ⁠8.52%. Its fiscal third-quarter capital expenditure rose 49% year-over-year to $31.9 billion, down from the previous quarter's $37.5 billion.

Investors will be watching whether Microsoft's AI investments are translating into stronger enterprise adoption.

Beyond its Azure cloud computing platform growth, they are also eyeing whether customers are embracing Microsoft's AI tools within its ecosystem or ​turning to ​outside providers.

"Investors have seen the AI spending. Now they want to see the ​receipts," said Peter Andersen, founder and CEO of Andersen ‌Capital Management. "FOMO 'Fear of Missing Out' is now 'Fear of Massive Overbuilding'."

INVESTORS STILL BULLISH ON SECTOR

Still, many investors remain bullish. A trader spent about $10.4 million on Monday to buy 20,000 call options tied to Microsoft's stock ahead of earnings, betting the shares will rise above $450 by August, according to Chris Murphy, co-head of derivatives strategy at Susquehanna, a market maker. Calls give the buyer the right to purchase a stock at a set price by a specific date.

"Investors were willing to pay high option premiums for upside exposure," said Murphy, despite recent stock underperformance, which has prompted Microsoft ‌to cut jobs and restructure its Xbox-related business.