Of the four hyperscalers that reported this week, here's what to buy

Major US hyperscalers—Alphabet, Amazon, Meta, and Microsoft—reported earnings this week, revealing substantial capital expenditure increases driven by AI investments and eliciting mixed market reactions. Amazon and Alphabet saw stock gains and analyst support for their escalating AI-related capex, citing strong cloud and AI momentum, with Amazon Web Services' growth accelerating and Alphabet's ballooning capex deemed justified by returns. Conversely, Meta experienced a significant pullback despite AI's benefit to engagement, and Microsoft's shares dipped slightly even with plans for substantial AI capacity expansion. Analysts are closely scrutinizing these massive investments, generally viewing continued AI spending as underpinning future growth, despite immediate market volatility reflecting differing confidence in each company's path to tangible returns.

Analysis

Major U.S. hyperscalers—Alphabet, Amazon, Meta Platforms, and Microsoft—reported earnings this week, revealing substantial capital expenditure increases driven by massive AI investments. While all emphasized their AI strategies, market reactions varied significantly, with UBS noting that strong AI spending is the primary driver of performance and should underpin the AI-led rally for the next 6-12 months.

Amazon and Alphabet demonstrated strong positive momentum, with Amazon's stock soaring after beating earnings and revenue, and its AWS revenue growth accelerating by 300 basis points to 20% year-over-year. Amazon also raised its CapEx forecast to $125 billion, while Alphabet increased its 2025 CapEx to $91-93 billion, with Bernstein analysts justifying this as a fair trade-off for accelerating momentum and returns.

In contrast, Meta experienced a significant pullback, with shares down over 10% for the week, following a narrowed CapEx guidance of $70-72 billion. Despite Deepwater Asset Management's view that AI benefits Meta's engagement and ad growth, Mizuho attributed the sell-off to stock-specific challenges. Microsoft's shares also dipped slightly, around 2-3%, despite forecasting a 45% rise in fiscal 2026 CapEx to boost AI capacity by over 80%, with Bank of America remaining constructive on its balanced risk/reward.

Key Decisions for Investors

• Investors should differentiate between hyperscalers based on their immediate market reaction and the clarity of their AI monetization strategies, favoring those demonstrating accelerating returns.
• Closely monitor capital expenditure guidance, as sustained AI investment is expected to drive market performance over the next 6-12 months.
• Evaluate recent stock pullbacks, such as Meta's, to determine if they present buying opportunities by weighing long-term AI benefits against short-term stock-specific challenges.