The performance of Meta's stock has taken a hit, dropping around 10% in 2026. Major investors, who play a pivotal role in market movements, are discreetly divesting from Meta while potentially redirecting their investments towards Google.
Financial Concerns Are Driving the Shift
Meta Platforms (META) has announced an aggressive spending plan for 2026, aiming to invest between $125 billion and $145 billion, primarily focusing on artificial intelligence (AI) data centers. This substantial outlay raises questions about returns on investment. The stark reality is that nearly all of Meta’s revenue, approximately 98% of its projected $200.97 billion sales in 2025, is still generated from advertising.
The demand for AI infrastructure is reaching new heights, with U.S. tech companies expected to commit a staggering $850 billion towards data center leases in the forthcoming years. This figure signifies a year-over-year increase of $570 billion, equivalent to a 204% rise, and a quarter-over-quarter boost of $200 billion, or 31%.
The Cloud Business Gap
Unlike tech giants such as Google, Amazon, and Microsoft, Meta does not operate a cloud service to capitalize on its new computing capabilities. Consequently, its hefty investments in AI lack a direct revenue stream. However, there are signs that this might be evolving. Reports from Bloomberg indicate that Meta is in the early stages of developing an internal cloud service dubbed Meta Compute, designed to monetize its surplus AI capacity.
In April, JPMorgan expressed its concern regarding Meta’s strategy, downgrading its rating to Neutral and adjusting its target price from $825 to $725. The bank highlighted a potential decline in free cash flow for the company, which would mark a notable shift after years of positive cash flow.
Investment Trends Indicate a Shift to Google
These reservations have led to noticeable changes in investor behavior. The Chaikin Money Flow, a metric that gauges the buying and selling behavior of large funds, shows a reading of -0.209 for Meta, indicating consistent selling activity. In contrast, Google boasts a positive score of +0.177, signaling steady buying.
Moreover, in relative strength analysis, which assesses a stock’s performance against its peers, Meta records a score of 95.8, underperforming compared to Google, which scores 123.0. Investors appear to be switching their focus from Meta to Google, both of which belong to the same AI sector known as Hyperscalers. Google’s established cloud division enables it to turn its AI investments into revenue promptly, while Meta is yet to realize a similar capability. This considerable gap between operational success and planned initiatives is driving the investment flow.
Meta's Struggles in a Challenging Market
The broader market context appears vulnerable, with only 32% of AI-related stocks trading above their 50-day average price. This low figure indicates a fragile rally. Notably, stocks categorized as hyperscalers, including Meta, show the weakest performance in this cluster.
In conclusion, Meta's sluggish performance isn't just a standalone issue; it reflects broader challenges within the weakest segment of the market. As investors look for stable returns, the shift towards companies with proven revenue streams, like Google, continues to gain momentum.
