Tech investors are grappling with a paradox today: two of the biggest AI names – Meta Platforms Inc (NASDAQ: META) and Microsoft Corp (NASDAQ: MSFT) – reported a better-than-expected quarter, yet both stocks are trading lower.
The culprit? Escalating capital expenditures tied to their AI ambitions.
Despite solid sales growth and earnings outperformance, the market is scrutinising the long-term cost of scaling AI infrastructure, especially as visibility into monetisation remains murky.
META and MSFT stock price action underscores a growing tension between near-term profitability and long-term strategic bets on artificial intelligence.
Here’s how Wall Street recommends playing the two AI stocks amid plans of continued aggressive spending.
How to play Meta stock after Q3 earnings?
Meta concluded its fiscal third quarter with $7.25 a share of earnings on $51.24 billion in revenue, handily above $6.69 per share and $49.41 billion that analysts had forecast.
But the strong headline numbers are being eclipsed by the company’s revised guidance for capital expenditures.
Meta now expects its capex to fall between $70 billion and $72 billion in 2025, up from the previously guided range of $66 billion to $72 billion, as it doubles down on AI infrastructure.
The spending surge triggered a wave of analyst downgrades and price target cuts on October 30.
Oppenheimer, for example, downgraded META shares this morning to “perform” and removed its $696 price target, citing concerns over the pace and scale of investment.
“Significant investment in Superintelligence despite unknown revenue opportunity mirrors 2021-2022 Metaverse spending,” it told clients in a research note on Thursday.
The investment firm warned Meta’s valuation is difficult to justify until there’s clearer visibility into 2027 earnings, especially as Google’s more predictable earnings profile offers a more compelling alternative.
“Implied 4Q opex/capex both 7% ahead of Street and guiding FY26 capex dollar growth ‘notably larger than 2025’ and expenses ‘significantly faster’ than 2025’s +23%, both ahead of Street.”
META stock opened some 12% down on Thursday but remains up roughly 10% versus the start of this year.
How to play Microsoft stock after Q1 earnings?
Continued momentum in Azure saw Microsoft earn $3.72 per share in its first financial quarter on $77.67 billion in revenue.
But the stock dipped 2% this morning after Amy Hood, the company’s chief of finance, said capital expenditures for fiscal 2026 would exceed those of the prior year as MSFT pushes to grow its AI footprint.
For Q1, the titan recorded $34.9 billion in capex, a figure that reflects its aggressive infrastructure buildout.
Unlike Meta, however, Wall Street analysts maintain their constructive view on Microsoft shares.
JPMorgan, for example, reiterated its “overweight” rating on the AI stock and raised its price target to $575.
“While we acknowledge quarterly gyrations in Azure and other portions of the business, we see MSFT’s fundamentals trending in the right direction,” the investment firm wrote.
JPM highlighted several positives, including strong bookings and RPO metrics, and emphasised that the increased spending is aimed at potentially doubling the company’s data centre footprint over the next two years.
Unlike Meta, Microsoft’s spending plans were met with more patience from analysts, who view the investments as necessary to meet surging demand.
The divergence in sentiment reflects differing levels of confidence in each company’s ability to translate AI infrastructure into sustainable revenue growth.
MSFT stock is currently up some 50% versus its year-to-date low.
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