Investors still trust Google more than Meta when it comes to spending their money on AI
Both Meta and Alphabet exceeded earnings expectations and increased their capital expenditure guidance amid heavy investments in AI infrastructure, but Wall Street reacted differently, with Alphabet's stock rising and Meta's falling. The divergence reflects investor skepticism about Meta's ability to monetize AI without a cloud business, unlike Alphabet, Microsoft, and Amazon. Alphabet's strong cloud growth and higher stock gains over the past year underscore its current market advantage in AI-related valuation.
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Meta and Alphabet both beat expectations in their earnings reports on Wednesday, each recording their fastest growth in years. They also lifted their guidance for capital expenditures for the year, telling investors that they're going to keep pouring money into artificial intelligence infrastructure. But despite their similarly upbeat results, Wall Street had very different reactions. Alphabet shares popped 7% in extended trading, while Meta's stock fell 7%. It's the continuation of a theme that's hampered Meta throughout much of the generative AI boom. While Alphabet and fellow hyperscalers Microsoft and Amazon all have massive cloud infrastructure businesses, allowing them to turn their AI investments into revenue, Meta has no such offering.
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