JPMorgan Swaps Alphabet for Meta on Its Focus List, Citing AI-Driven Ad Growth

The change, made on Monday, is not a downgrade. Anmuth still rates Alphabet Overweight, according to Investing.com's account of the note, and the bank framed the move as a judgement about which company has stronger near-term earnings momentum after third-quarter results. "Meta's relative advertising strength is more evident than ever," Anmuth wrote.

The call matters because it puts a large brokerage behind a specific reading of the AI trade at a moment when investors are questioning heavy capital spending across Big Tech. JPMorgan is backing the company that is showing returns in its core ad business and stepping back from the one whose search growth is slowing while its spending climbs.

All three stocks rose in early trading despite the wider sell-off in chip shares. Meta gained about 5% to around $637.77 and Amazon rose about 5% to around $272.27, while Alphabet still added about 3% to around $293.71, according to 24/7 Wall St.

The Case for Meta

Meta's advertising revenue grew 26% year on year in the third quarter, with growth of 33% in North America. JPMorgan estimates the company added about $13 billion in incremental ad revenue in the quarter, roughly double the increase at Google Search, and expects revenue from Meta's family of apps advertising to overtake Google Search in the fourth quarter of 2026 and beyond.

The bank attributes the gains to AI-driven improvements in how Meta targets and ranks ads. It also cited Meta's Muse assistant, which it said has 10 million sign-ups in the US and Canada, and the company's opportunities to sell AI to businesses.

Why Alphabet Lost Its Place

JPMorgan's concern with Alphabet is the pace at which its AI investment is paying off. Google Search revenue growth slowed to 12% in the third quarter, from 19% in the first quarter and 17% in the second. Free cash flow was negative for a second straight quarter, and the company's capital spending guidance for 2026 is $195 billion to $205 billion, with spending expected to rise significantly in 2027.

The bank did acknowledge strength elsewhere. Google Cloud revenue grew 103% and its backlog stands at $561 billion, but JPMorgan noted that sales of TPU systems contributed meaningfully to that growth and that margins could come under pressure.

Amazon stays on the list on the strength of its cloud business. Amazon Web Services revenue grew 39% year on year in the third quarter, and Amazon has said it expects AWS growth above 40% in both 2027 and 2028. The combined backlogs of AWS and Google Cloud exceed $1.1 trillion, according to the note.

The call carries its own risks. 24/7 Wall St. pointed out that Meta has the heaviest legal and regulatory burden of the group, and could face margin pressure if advertising growth cools, while a pickup in search monetisation at Alphabet would make JPMorgan's switch look premature.

The rotation came on the same day Nvidia shares fell about 7% to around $173.05, as the chipmaker's board investigates chief executive Jensen Huang. Nvidia reports quarterly results on November 17.