Three major U. S. technology companies, Alphabet (Google’s parent), Microsoft, and Meta (Facebook’s owner), announced plans to increase capital spending next year, focusing on chips and data centers. While all three companies have seen significant stock price increases this year due to expectations from their roles in the AI sector, investors reacted differently to their announcements. Alphabet’s stock rose over 5% because investors believe it can support its investments with strong cash flow. In contrast, shares of Meta fell by more than 11% and Microsoft by more than 2% as concerns about the timeline for returns on such investments lingered.
Analysts noted that Alphabet’s expenses represent a smaller percentage of its cash flow compared to its peers. Alphabet’s capital expenditure for the September quarter was 49% of its cash from operations, while Meta’s was 64.6% and Microsoft’s even higher at 77.5%. Despite the focus on AI, big tech companies have not provided clear details on how much AI contributes to their earnings, causing investor caution. Executives emphasize the need for these investments to meet growing demand for AI computing power. Meta’s CEO mentioned that even in the worst-case scenario, the company would potentially face losses but expects to recover over time. Amazon will provide further insights into AI investments when it reports its earnings.
With information from Reuters