Alphabet Stock Soars as Morgan Stanley Reassures on AI Spending

Alphabet stock surged 5.1% on Monday after Morgan Stanley analysts reassured investors about the company's prospects amid record levels of investment in AI infrastructure.

Last week, Alphabet reported strong earnings that beat expectations with profits of $9.11 per share - triple what analysts expected. However, investors were spooked by Alphabet's announcement that it was doubling down on AI spending and raising its forecast for capital investment this year to a mind-bending $195 billion to $205 billion.

Morgan Stanley analysts pointed out that all four major AI hyperscalers - Amazon, Meta, Microsoft, and Alphabet itself - are spending heavily on AI infrastructure. In fact, Amazon is spending even more than Alphabet, with a budget of $220 billion, while Meta has a $130 billion to $145 billion budget.

The analysts noted that this investment is driving huge cloud revenue growth, with Google Cloud Platform growing 82% year over year. They also pointed out that strong operating cash flow and other financing strategies are helping fund capex, leaving Alphabet with still $53.3 billion in positive free cash flow over the past 12 months.