Key Takeaways
- Shares of Google parent Alphabet tumbled Wednesday amid worries about whether the tech giant’s spending on AI will pay off.
- Several analysts lowered their price targets for the stock, citing concerns about the company’s weaker-than-expected cloud growth and plans to ramp up spending on AI.
- Some analysts suggested the investment could help drive growth as Alphabet raises its capacity to meet demand.
Shares of Google parent Alphabet (GOOGL) tumbled Wednesday as several analysts lowered their price targets for the stock, citing concerns about the tech giant’s weaker-than-expected cloud growth and plans to ramp up spending on AI.
Alphabet said it plans to invest as much as $75 billion in capital expenditures this year, much of which is expected to go toward expanding its artificial intelligence infrastructure to meet demand.
That figure is about $15 billion more than Wall Street expected, UBS analysts said, which suggests new Google products will need to emerge in order to “warrant the higher level of investment.” The bank dropped its price target to $191 from $211, saying “investors will need to wait” for Alphabet’s AI investments to pay off.
JPMorgan analysts took their price target down to $220 from $232, expressing similar concerns. By contrast, Meta (META), which said it plans to invest $60 billion to $65 billion this year, offered a “more apparent” path to a return on that investment through its advertising business, the analysts said.
The lower price targets also come after Chinese AI startup DeepSeek claimed to develop an AI model rivaling American ones for a fraction of the cost, raising concerns about American firms’ AI spending.
Google Cloud’s Silver Lining Could Come With Growth on Higher Capacity
However, several analysts including JPMorgan and Wedbush also suggested the investment could help boost growth as Alphabet raises its cloud capacity to meet demand.
Analysts at Bank of America added Wall Street may be “underestimating Al Overview benefits for [Google] Search monetization in 2025.” The bank maintained a “buy” rating and $225 price target.
Shares of Alphabet dropped nearly 8% in intraday trading Wednesday to $192.23. Despite Wednesday’s losses, they’ve gained more than 30% over the past 12 months.