AI Capex Divergence: Alphabet Surges While Meta Plummets on Spending Concerns

Alphabet and Meta experienced starkly different market receptions on Thursday following the release of their first-quarter earnings and updated capital expenditure forecasts. While Alphabet shares climbed over 5%, Meta shares plummeted 10%, marking one of the company's worst trading sessions since late 2025. The volatility underscores a shift in investor sentiment regarding artificial intelligence. Wall Street is increasingly distinguishing between 'hyperscalers' with cloud infrastructure—who can monetize AI tools directly—and companies relying on AI primarily to enhance existing advertising models. Alphabet reported strong first-quarter revenue, bolstered by a 63% year-over-year surge in Google Cloud revenue. CEO Sundar Pichai attributed this growth to enterprise demand for AI solutions. Consequently, the company raised its annual capex guidance to a range of $180 billion to $190 billion, up from a previous estimate of $175 billion to $185 billion. Despite beating earnings and revenue expectations, Meta saw its stock slide after raising its capex forecast to between $125 billion and $145 billion. The company cited higher component pricing and data center costs as primary drivers. Additionally, daily active people (DAP) were negatively impacted by internet disruptions in Iran. The market's reaction was further influenced by the broader landscape, with Microsoft raising its 2026 capex to $190 billion and Amazon maintaining a leading budget of $200 billion. JPMorgan subsequently downgraded Meta to neutral, citing a 'challenging path' to generating returns outside the core advertising business.