Alphabet and Meta's Massive Investments in AI
Written by Emily J. Thompson, Senior Investment Analyst
Updated: Mar 21 2026
0mins
Should l Buy GOOGL?
Source: NASDAQ.COM
- Significant User Growth: Alphabet's Gemini app surpassed 750 million monthly active users in Q4 last year, indicating strong performance in the AI assistant market and further solidifying the company's leadership in digital advertising and cloud services.
- Capital Expenditure Plans: Alphabet and Meta plan to invest approximately $305 billion in capital expenditures by 2026, primarily for building servers and data centers, which will significantly enhance their AI infrastructure capabilities and drive future business growth.
- Advertising Automation Innovation: Meta plans to launch its Meta AI business assistant aimed at optimizing ad campaigns through automation, which not only enhances advertiser satisfaction but also strengthens Meta's competitive position in the advertising market.
- Long-Term Profit Potential: Both companies exhibit a strong investment appetite in AI, with Alphabet's diversified business model and Meta's robust user base providing significant profit potential in the future AI market, attracting investor attention.
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Analyst Views on GOOGL
Wall Street analysts forecast GOOGL stock price to rise
33 Analyst Rating
26 Buy
7 Hold
0 Sell
Strong Buy
Current: 297.390
Low
305.00
Averages
374.25
High
400.00
Current: 297.390
Low
305.00
Averages
374.25
High
400.00
About GOOGL
Alphabet Inc. is a holding company. The Company's segments include Google Services, Google Cloud, and Other Bets. The Google Services segment includes products and services such as ads, Android, Chrome, devices, Google Maps, Google Play, Search, and YouTube. The Google Cloud segment includes infrastructure and platform services, collaboration tools, and other services for enterprise customers. Its Other Bets segment is engaged in the sale of healthcare-related services and Internet services. Its Google Cloud provides enterprise-ready cloud services, including Google Cloud Platform and Google Workspace. Google Cloud Platform provides access to solutions such as artificial intelligence (AI) offerings, including its AI infrastructure, Vertex AI platform, and Gemini for Google Cloud; cybersecurity, and data and analytics. Google Workspace includes cloud-based communication and collaboration tools for enterprises, such as Calendar, Gmail, Docs, Drive, and Meet.
About the author
Emily J. Thompson
Emily J. Thompson, a Chartered Financial Analyst (CFA) with 12 years in investment research, graduated with honors from the Wharton School. Specializing in industrial and technology stocks, she provides in-depth analysis for Intellectia’s earnings and market brief reports.
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See More
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- Strong Market Demand: The insatiable demand for AI is driving profits for cloud computing companies, with Nvidia projected to achieve $1 trillion in chip sales by 2027 and Broadcom's custom AI chips expected to generate over $100 billion in annual revenue.
- Cloud Giants Performance: Alphabet and Microsoft are reaping significant returns from their cloud computing investments, with Azure and Google Cloud revenues increasing by 39% and 48% year-over-year, respectively, despite both companies' stock prices dropping over 20%, indicating their sustained market leadership.
- Investment Opportunities Arise: While skepticism surrounds AI stocks regarding uncertain returns, the long-term outlook remains bullish, suggesting that the current 20% drop in stock prices presents a prime buying opportunity for investors.
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See More
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- Strengthened AI Competitiveness: Despite challenges, Alphabet has successfully transitioned, solidifying Google Search as a primary interface for AI interaction, with its generative AI platform, Gemini, emerging as a leading model in a competitive landscape.
- Cloud Computing Growth: Google Cloud's revenue surged 48% year-over-year in Q4, making it the fastest-growing among major cloud competitors, driven by its custom chips that enhance cost performance for AI applications, attracting numerous developers.
- Capital Expenditure Concerns: Alphabet plans to allocate $175 billion to $185 billion for data center construction by 2026, raising investor concerns about ROI; however, the company argues that engaging in AI technology is essential, potentially yielding long-term benefits.
See More
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- Valuation Timing: Ackman entered these three companies at P/E ratios of 16, 25, and 20 during periods of weak market sentiment, indicating a strategy focused on finding value amidst uncertainty, potentially laying the groundwork for future earnings growth.
- Capital Expenditure Plans: In 2026, Alphabet plans to invest $175 billion to $185 billion, while Amazon and Meta are set to spend $200 billion and $115 billion to $135 billion on AI-related investments, demonstrating their commitment to technological innovation.
- Cash Reserve Advantage: As of December 31, 2025, these three companies collectively held $331 billion in cash and cash equivalents, significantly exceeding their long-term debt, indicating strong financial capacity for future investments and market volatility management.
See More
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- Capital Expenditure Plans: Alphabet plans to invest between $175 billion and $185 billion in capital expenditures by 2026, primarily for data center construction, which raises investor concerns about the return on investment; however, the company believes participating in the AI technology shift is crucial.
- Cloud Computing Growth: Google Cloud's revenue surged 48% year-over-year in Q4, making it the fastest-growing among major cloud competitors, indicating its increasing popularity for AI application development, particularly due to its custom chips that offer better cost performance.
- Market Performance: Despite Alphabet's market cap dropping from $4.2 trillion at the beginning of the year to $3.5 trillion now, equivalent to losing an ExxonMobil's worth, its stock is currently trading at valuation levels not seen in several months, presenting a potential buying opportunity.
- Investor Confidence: Although Alphabet's stock trades at a forward earnings multiple of 25, which is not considered
See More
Bill Ackman's Investment Philosophy and AI Strategy
- Portfolio Concentration: As of December 31, 2025, Pershing Square's investments in Amazon, Alphabet, and Meta Platforms totaled $5.9 billion, representing nearly 40% of its portfolio, reflecting Ackman's strong confidence in these high-quality companies.
- Valuation Strategy: Ackman entered these positions during periods of weak market sentiment, initiating his investment in Alphabet in Q1 2023 at a forward P/E ratio of 16, followed by Amazon in April 2025 at 25, and Meta in Q4 2025 at 20, demonstrating his commitment to value investing.
- Capital Expenditure Plans: In 2026, Alphabet plans to spend $175 billion to $185 billion, while Amazon and Meta are set to invest $200 billion and $115 billion to $135 billion respectively; Ackman believes these investments will drive future earnings growth despite ongoing concerns about returns.
- AI Progress and Market Demand: Ackman praised the AI advancements of these companies, noting that Alphabet's AI Overviews has over 2 billion users, Amazon's cloud services thrive on strong AI demand, and Meta leverages AI to enhance user engagement and advertising effectiveness, showcasing their leadership in technological innovation.
See More
