Google, Meta, and Microsoft Spend $80 Billion on AI as Investor Reactions Diverge
Alphabet’s AI Investments Pay Off
Alphabet impressed Wall Street by boosting its full-year capital expenditure plans by $8 billion to $93 billion and reporting record quarterly revenue of $100 billion. The company’s shares climbed nearly 7% in after-hours trading and were up 5.3% in early Thursday trading. CEO Sundar Pichai attributed the growth to surging demand in the Google Cloud unit and the rapid adoption of AI-powered products, such as the Gemini App, which now boasts 650 million monthly users, closing in on ChatGPT’s 800 million.
Pichai said enterprise AI services are generating “billions in quarterly revenue,” with a computing services backlog of $155 billion. A 15% increase in core search advertising also helped counter fears that AI chatbots were cannibalizing Google’s search business. Analysts said Alphabet’s ability to maintain margins while scaling AI infrastructure “demonstrates effective use of spending.”
Meta’s Massive Outlay Sparks Market Sell-Off
In stark contrast, Meta Platforms’ stock tumbled more than 12%, erasing roughly $240 billion from its market value after CEO Mark Zuckerberg warned that AI spending could exceed $100 billion next year. Despite a 26% increase in quarterly revenue to $51.2 billion, investors were concerned by rising expenses and declining margins. Meta’s operating margin fell to 40%, with R&D costs reaching 30% of revenue — the highest level in more than two years.
“Expenses are growing faster than revenue,” said Gene Munster of Deepwater Asset Management, projecting 35% expense growth versus 18% revenue growth in 2026. Zuckerberg defended the strategy, arguing that frontloading AI capacity was necessary to achieve artificial superintelligence. He emphasized that any excess computing resources could bolster Meta’s ad operations, which remain “compute-starved.”
However, analysts like Brian Wieser of Madison and Wall said Meta’s efforts appear disconnected from its core business: “Google and Microsoft are doing much more from a tech perspective. Meta’s actual business is selling ads.”
Microsoft’s “Planet-Scale” Ambition Faces Investor Caution
Microsoft shares fell 4% after hours, then another 2.3% on Thursday, despite reporting strong profits and a 39% surge in Azure cloud revenue. The company spent $35 billion in capital expenditures last quarter — up 74% year-over-year and $5 billion above forecasts — and expects to invest $140 billion next year.
CEO Satya Nadella told analysts the company was building “planet-scale infrastructure” to double its data center footprint within two years, describing the expansion as critical to maintaining leadership in AI and cloud computing. Microsoft’s valuation surpassed $4 trillion earlier this week following its restructuring agreement with OpenAI.
Investor Patience Tested Amid AI Arms Race
Market analysts said the divergent stock reactions highlight investor anxiety over how long it will take AI infrastructure spending to translate into tangible revenue. “Investors are worried that the rush to grab market leadership may cause an overshoot,” said Dec Mullarkey of SLC Management. “History is full of technology booms that left early investors battered.”
With Big Tech’s combined AI investment for the year expected to surpass $400 billion, the question remains whether these colossal bets will deliver sustainable profits — or signal the peak of another tech spending cycle.