Microsoft stock jumps on prudent AI spending while Meta falls on aggressive capex

Meta Platforms is drawing bullish analyst attention as its stock trades near $648 despite record quarterly revenue, with a $900 price target implying roughly 39% upside. Second-quarter revenue reached $60.8 billion, up 28% year over year, at a 31% operating margin, and the stock trades at a forward price-to-earnings ratio of 19, below the S&P 500's approximately 22 times forward earnings. Morgan Stanley analyst Brian Nowak maintains a $775 price target and projects Meta's AI pipeline could lift earnings per share by more than $10, a roughly 34% increase over 2025 adjusted EPS of $29.68, after the company settled youth social media addiction lawsuits for up to $18 billion over a decade. The bull case faces headwinds from capital expenditures of $31.1 billion in the second quarter, up 82% year over year, full-year 2026 capex guidance of $130 billion to $145 billion, and a Reality Labs loss of $4.62 billion, which compressed free cash flow to $784 million from $8.55 billion a year earlier. Meta guided third-quarter revenue to $61 billion to $64 billion, and its Connect 2026 event on Sept. 23 plus third-quarter earnings in late October will test whether the AI spending is translating into new revenue.

Warren Buffett and newly appointed Berkshire Hathaway CEO Greg Abel have plowed tens of billions of dollars into Alphabet, making it one of Berkshire's biggest investments, after Buffett finally bought the stock in the third quarter of 2025 with shares trading around $200. Buffett had long said he missed the opportunity, noting at the 2017 shareholder meeting that he would not bet against Google, and he has acknowledged missing out on a 9,000% gain by not buying sooner. Google initially offered shares to the public at $85 each in 2004, and after a 2014 split into two share classes and a 20-for-1 split in 2022, the split-adjusted price is just $2.125 per share. Buffett said he likes the stock now because Alphabet plans to spend around $200 billion in capital expenditures this year on new data centers and AI servers, a use of capital he sees earning a high cash return. Google Cloud CEO Thomas Kurian said the average payback period on its new servers is less than two years, and roughly half that for Google's custom TPUs, while average five-year customer contracts and a two-year lead time on data center construction mean even a worst-case scenario produces a positive return. With the stock trading for less than 17 times forward earnings expectations, Buffett and Abel could keep buying in the third quarter.