Key facts
- Nvidia's stock surged around 10% on Thursday following a strong earnings report and optimistic growth predictions.
- Alphabet's stock has declined 15% from its May peak, representing a $692 billion loss in market capitalization over three months.
- Meta's stock has fallen 27% from its August 2025 peak, with a market cap reduction exceeding $500 billion.
- Alphabet's AI infrastructure spending is projected to reach $205 billion this year, an increase from prior guidance.
- Meta anticipates capital expenditures of up to $145 billion this year.
- Meta's free cash flow dropped 91% in the second quarter.
- Meta agreed to a $18 billion settlement in a teen addiction lawsuit.
Nvidia's stock experienced a significant surge, driven by strong AI-related revenue and optimistic growth forecasts, highlighting the continued strength of the AI trade. This performance stands in stark contrast to Alphabet and Meta, two former high-flyers within the 'Magnificent Seven' group, whose shares have recently faltered.
Alphabet's stock has seen a notable decline, dropping 15% from its May peak and losing approximately $692 billion in market capitalization over the past three months, though it remains up 7% year-to-date. Investors are reportedly concerned about the company's rapidly increasing AI infrastructure spending, which is now projected to reach $205 billion this year, up from previous guidance. Analysts emphasize the need for Alphabet to demonstrate tangible returns on these substantial investments.
Meta has experienced a more prolonged downturn, with its stock down 27% from its August 2025 peak. The social media giant faces similar concerns regarding heavy AI capital expenditures, which are expected to reach up to $145 billion this year. Additionally, Meta is grappling with questions around its monetization strategies for AI and core services, and a significant 91% plunge in free cash flow during the second quarter to $784 million. The company's recent agreement to settle a teen addiction lawsuit for $18 billion further complicates its financial position, especially as it competes in the AI race.
Analysts suggest that a rotation within the 'Magnificent Seven' is occurring, with Alphabet previously being a standout performer. The recent stock declines for Alphabet and Meta are attributed to factors including increased capital expenditure on AI, leadership changes, product delays for Alphabet, and monetization and cash flow concerns for Meta. Investors are expected to re-engage with these stocks once their businesses show renewed momentum and tangible acceleration.