Big Tech companies are continuing to spend record amounts on AI data center buildouts with no internal plans to slow down. Amazon, Microsoft, Alphabet, and Meta told investors they’re planning to spend at least $720 billion on CapEx this year alone, with most of that going toward AI infrastructure. This is on top of at least $1 trillion in spending commitments that have been arranged for the coming years.
The massive spending plans officially spooked Wall Street and triggered a sharp selloff in tech stocks last week that began to taper off as investors shifted focus to Tuesday’s midterm elections. Those spending plans could change after voters across the country elected candidates who favor moratoriums and other restrictions on data centers.
Despite the heavy investment, the companies haven’t really made money from AI yet, and they’re continuing to double down on it anyway. While top-line revenue is growing—Amazon reported its fastest growth in five years for the quarter, Meta’s ad revenue is surging, and Google Cloud’s revenue more than doubled in a year—investors are starting to get antsy about the promised payoff of AI and exactly when they might expect to see a return on investment.
Alphabet offered an uncomfortable example of this last week when Philipp Schindler, Google parent Alphabet’s senior vice president and chief business officer, acknowledged on the company’s earnings call that Google Cloud’s revenue growth has come at the expense of its core Search business. “It’s worth noting that the strong growth in AI Mode queries had an impact because of the lower monetization we were seeing in AI Mode,” Schindler said. Revenue from Google’s Search ads grew 12% in the third quarter, a marked drop from the 17% growth rate the division posted for the same quarter last year. Schindler stated, “To be clear, we feel very good about our trajectory here. Our ad experiments have shown promising results,” though he did not offer any specific examples.
Alphabet plans to spend between $195 billion and $205 billion in capital expenditures this year and is also planning to increase spending “significantly” in 2027, according to CFO Anat Ashkenazi. Amazon intends to spend “meaningfully more” in 2027 than the $220 billion in capital expenditures it is planning this year, CEO Andy Jassy said on the company’s earnings call last week. Jassy framed the spending—the largest ever in the company’s history—as a “once in a lifetime opportunity” to grow Amazon into a $1 trillion company. “Would it be more convenient if this type of acceleration and opportunity happened over 25 years and you could spread the CapEx over 25 years? Yeah, it might be more convenient,” Jassy said. “But that’s not the world we live in, and that’s not the opportunity.”
Meta, which is expected to spend between $135 billion and $145 billion this year, is expected by major financial institutions to increase its spending from this year. In touting the company’s rollout of Muse, Meta CEO Mark Zuckerberg noted that the agentic AI program will only become profitable if Meta can get its compute costs down. Zuckerberg noted that Meta expects compute efficiency to increase “tenfold” next year, an endeavor he expects will take “significant investment.”
The high costs of the AI race are also affecting startups. Anthropic updated its S-1 prospectus with third-quarter revenue this week, revealing a sharp uptick in computing costs and net losses. The AI startup’s revenue grew to $17 billion in the quarter, a more than 1,000% increase from last year, but its compute costs came in at $17.5 billion. Anthropic has also committed nearly $900 billion in future compute and infrastructure costs, and it plans to begin building its own data centers. Some of that $900 billion will go to Google, which is selling its TPU chips to Anthropic.
When asked if the money made from selling TPUs would help Google tamper some of its own spending, Ashkenazi didn’t give a clear yes or no answer. However, Google is fronting the costs of building the hardware it sells to AI labs like Anthropic. Those contracts are supported by financial obligations that will come due when the hardware is ready to be used, but they don’t represent cash in Google’s pocket right now.
Microsoft was the only Big Tech company to escape Wall Street’s ire last week. The company posted $45.2 billion in capital expenditures for the quarter, down from an expected $50 billion. However, the lesser spend wasn’t due to any austerity on Microsoft’s part, but rather “third party capacity delays.” Until last week, Microsoft had been the only hyperscaler that hadn’t taken on debt to fund its AI buildout. “We are fortunate to have access in the debt markets, given where our ratings are, and we have not yet, I would say, tapped that,” CFO Amy Hood said on the company’s earnings call Wednesday night. That had changed by the next morning, when news of Microsoft’s $25 billion, 10-part bond sale broke.
