Alphabet and Meta Delivered Worrisome News for Investors -- and It Has Trillion-Dollar Implications
Key Points
AI is Wall Street's hottest trend, with influential businesses spending a small fortune on AI-driven capital expenditures.
The early returns of aggressive AI spending have been promising for Google parent Alphabet and social media titan Meta Platforms.
However, mammoth outlays for AI mean there's little or no capital left for share buybacks.
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For roughly three decades, investors have been waiting for a game-changing technology to rival what the internet was able to do for corporate America (and retail investors). Artificial intelligence (AI) has answered the call.
Empowering software and systems with the tools to make split-second, autonomous decisions can lead to productivity gains worth trillions of dollars. It's why companies that have devoted significant capital to the AI revolution, such as Alphabet (NASDAQ: GOOGL)(NASDAQ: GOOG) and Meta Platforms (NASDAQ: META), have been handsomely rewarded by investors.
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Image source: Getty Images.
Google parent Alphabet and Meta Platforms are spending big on AI, with promising early results
Google parent Alphabet is setting aside $180 billion to $190 billion for AI-driven capital expenditures this year, while Meta Platforms has increased its AI spending forecast to a range of $125 billion to $145 billion.
It's hard to argue against such aggressive AI spending, given the early stage results both companies have achieved when deploying AI solutions. Incorporating generative AI and large language model capabilities into cloud infrastructure service platform Google Cloud sent high-margin sales skyrocketing 63% in the March-ended quarter.
Meanwhile, Mark Zuckerberg's Meta has incorporated generative AI into its social media advertising platform, enabling its customers to create unique static and video messages that can improve clickthrough rates and enhance its exceptional ad pricing power.
Though it would appear that this AI spending is well worth it, Alphabet's and Meta's first-quarter operating results also came with worrisome news for investors.
Image source: Getty Images.
As AI capex soars, one of Wall Street's biggest tailwinds, share buybacks, may disappear
As many of Wall Street's most influential businesses increase their AI capex, we've witnessed a concurrent slowdown in share repurchase activity. After Alphabet and Meta spent $15.1 billion and $12.8 billion, respectively, to buy back their common stock in the first quarter of 2025, both companies spent exactly $0 during the first quarter of 2026 on buybacks.
Share repurchases by S&P 500 companies have been a massive tailwind for the stock market. The Tax Cuts and Jobs Act, signed by President Donald Trump in December 2017, permanently lowered the peak marginal corporate income tax rate from 35% to 21% (the lowest since 1939). Public companies being able to retain more of their earnings led to a significant increase in share buybacks starting in 2018.
According to research from The Motley Fool, share buybacks by S&P 500 companies were estimated to reach an all-time high of up to $1.2 trillion in 2025.
S&P 500 buybacks were $249.0b in 3Q25, up 6.2% from 2Q25 and up 9.9% from 3Q24; top 20 S&P 500 companies accounted for 49.5% of 3Q25 share repurchases, down from 51.3% in 2Q25
-- Liz Ann Sonders (@LizAnnSonders) December 19, 2025
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In addition to incentivizing long-term investing, share repurchases provide an earnings-per-share (EPS) tailwind. For companies with steady or growing net income, a steady diet of buybacks can lower the outstanding share count, increase EPS, and make a company's stock more fundamentally attractive to value-focused investors.
Alphabet has spent $346 billion to retire nearly 13% of its outstanding shares over the last decade. Mark Zuckerberg's Meta has lowered its share count by an almost identical percentage (12.7%) over the trailing decade. These investments have decisively increased EPS and made their respective valuations more attractive.
But with both companies diverting significant capital to AI capex, and other large-scale tech players following suit, one of Wall Street's most prominent tailwinds could soon be gone.
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Sean Williams has positions in Alphabet and Meta Platforms. The Motley Fool has positions in and recommends Alphabet and Meta Platforms. The Motley Fool has a disclosure policy.
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