Meta may be on track to surpass Google Search this year, says Bernstein. On September 1, Bernstein SocGen Group analyst Mark Shmulik reiterated an Outperform rating and $800.00 price target on Meta Platforms, Inc. (NASDAQ: META)
The firm has argued that Meta has seen the largest advertising benefit from AI. The irony from his note is that even though digital ad fundamentals have been strong, digital ad stocks such as Meta and Google have struggled.
Meta’s AI Payoff and Google Search
Meta captured nearly half of the growth in digital ad spending industry wide during the second quarter. Its quarterly ad revenue for Q2 2026 was $59.4 billion, up 27% year-over-year.
Meanwhile, Google Search & other revenue reached $63.3 billion, up 17% year-over-year. Except for Google ad revenue outside of core Search, Bernstein believes Meta may have already caught up with Google Search.
Meta’s bull case therefore rests on its existing advertising model. In Search, users have to explicitly reveal their search intent through queries. However, Meta has an edge as it can predict what ad and content its users are more likely to engage with. This makes AI-driven improvements extremely beneficial.
The Bear Case: The Capex Problem Still Exists
Bernstein’s note flags the risks for both stocks: unprecedented AI capex, uncertain returns, and durability concerns.
For Meta, the tech giant anticipates capital expenditures of $130 billion to $145 billion for 2026. No wonder the company faced a 91% drop in second-quarter free cash flow, highlighting the financial strain it is facing due to the costly AI buildout amid an uncertain payoff.
The numbers reveal that even though ad revenue gains are real, it is being accompanied by spending at a scale that will have little room for error in case growth decelerates or there is a capex problem.
Alphabet also raised its full-year 2026 capex guidance to between $195 billion and $205 billion. The real question, therefore, is about which company extracts the best returns from spending.
Analysis and Bottom-line
Hedge funds show mixed positioning around Meta. For the second quarter of 2026, 254 hedge funds held positions in Meta, down from 262 in the prior quarter. Meanwhile, hedge fund interest has been increasing for Alphabet. As of the second quarter, 275 hedge funds held positions in Alphabet at the end of Q2, up from 265 in the previous quarter.
Overall, Bernstein’s note suggests Meta is closely bridging the gap with Google Search, yet both companies are spending unprecedented amounts to maintain their AI advantage. The next question for these stocks isn’t whether AI can drive growth, but if growth can justify the huge spending behind it.
READ NEXT: NVIDIA (NVDA): What Foxconn and Super Micro Are Telling Us about the AI Boom and Snowflake (SNOW) Stock: AI Growth Is Real, But Is the Valuation Already Priced In?
Disclosure: None. Follow Insider Monkey on Google News.
