SAN FRANCISCO (Realist English). The world’s largest tech companies — Google, Meta*, and Microsoft — collectively spent almost $80 billion last quarter to expand their artificial intelligence infrastructure, but markets reacted unevenly to the biggest investment wave in Silicon Valley’s history.
Alphabet’s shares jumped nearly 7% in after-hours trading on Wednesday after the Google parent raised its 2025 capital spending target by $8 billion to $93 billion and reported a record $100 billion in quarterly revenue.
In contrast, Meta’s* stock plunged almost 9%, threatening to erase $160 billion from its market value, after Mark Zuckerberg signaled that the company’s AI investment could exceed $100 billion next year.
“The market’s reaction shows how sensitive investors are to how quickly the AI build-out can translate into revenue,” said Dec Mullarkey, managing director at SLC Management, which oversees $300 billion in assets. “There’s a fear that the race for AI dominance could overshoot — and history is full of tech booms that ended painfully for early investors.”
Google gains confidence, Microsoft cools
Microsoft, which this week became the third company to cross a $4 trillion valuation after finalizing its restructuring agreement with OpenAI, also saw its stock fall 4% despite beating profit forecasts and posting a 39% revenue surge in its Azure cloud unit.
Microsoft disclosed $35 billion in quarterly capital expenditure, up 74% year-on-year, and forecast nearly $140 billion in spending for 2026. Chief executive Satya Nadella said the company was building “planet-scale” cloud infrastructure and would double its data center footprint within two years.
Both Google and Microsoft, which generate revenue by selling cloud services, were better able to convince investors that rising AI-related spending on chips, electricity, and data centers would yield future returns.
Google’s CEO Sundar Pichai said its consumer AI tool, Gemini, now has 650 million monthly users, up from 450 million in July, closing in on ChatGPT’s 800 million. He added that the company’s cloud division was generating “billions in quarterly revenue” from enterprise AI clients and held a $155 billion order backlog.
Pichai also noted a 15% increase in core search advertising, easing fears that generative AI could cannibalize Google’s main business. “Alphabet is showing how AI can drive ad growth while maintaining margins,” said Angelo Zino, analyst at CFRA Research.
Meta* faces backlash over “AI at any cost”
For Meta*, however, investor patience is wearing thin. The company’s 26% jump in quarterly revenue to $51.2 billion failed to offset concerns about soaring costs. Capital expenditures could hit $72 billion this year, with spending growth expected to be “notably larger” in 2026 — far above earlier forecasts of $105 billion.
Zuckerberg defended the aggressive outlay, calling it “the right strategy to frontload capacity” for Meta’s* long-term AI ambitions. He said any excess data center capacity could later support the company’s ad business, which he described as “compute starved.”
Meta’s research and development expenses rose to 30% of revenue, the highest in over two years, while its operating margin narrowed to 40%. Analyst Gene Munster at Deepwater Asset Management warned that “next year could bring 18% revenue growth and 35% expense growth.”
Meta* also booked a $15 billion one-off tax charge linked to President Trump’s fiscal reforms, slashing net income by 83% to $2.7 billion.
While Zuckerberg vowed that Meta’s* superintelligence program would eventually reach 3.5 billion users across Facebook, Instagram, and WhatsApp, analysts said its AI revenue timeline remains unclear.
“Google and Microsoft are executing on commercial AI ecosystems,” said Brian Wieser of Madison and Wall. “Meta’s* business is still advertising — and there’s only so far AI hype can stretch that.”
*Meta Platforms Inc. (owner of Facebook and Instagram) is recognized as an extremist organization and is banned in the Russian Federation.
