Tech Giants to Spend $720 Billion

Four major technology firms announced plans to spend at least $720 billion on capital expenditures this year, with most of that capital directed toward artificial intelligence infrastructure.

This expenditure comes on top of at least $1 trillion in spending commitments already arranged for the coming years. The announcements triggered a sharp selloff in tech stocks last week, though prices began to recover as investor attention shifted toward the midterm elections held Tuesday.

The four companies involved are Amazon, Microsoft, Alphabet, and Meta. Their earnings calls, held late last month, revealed that the AI data center buildout is not slowing down and that promised financial returns are not yet visible.

Amazon CEO Andy Jassy stated that the company intends to spend meaningfully more in 2027 than the $220 billion planned for this year. He described the spending as a once-in-a-lifetime opportunity to grow Amazon into a trillion dollar company.

Alphabet plans to spend between $195 billion and $205 billion in capital expenditures this year. CFO Anat Ashkenazi said the company also expects to increase spending significantly in 2027. Alphabet stock saw its worst one-day drop in history on Thursday last week, sinking 13% in a single session.

Meta expects to spend between $135 billion and $145 billion this year. CEO Mark Zuckerberg noted that the company's agentic AI program, Muse, will only become profitable if compute costs drop. He predicted a tenfold increase in compute efficiency next year, a goal he said requires significant investment.

Microsoft posted $45.2 billion in capital expenditures for the quarter, which was lower than the expected $50 billion. CFO Amy Hood attributed the lower spend to third-party capacity delays rather than cost-cutting measures. Microsoft announced a $25 billion, 10-part bond sale the morning after Hood's earnings call.

Revenue growth across the sector remains strong. Amazon reported its fastest growth in five years, Meta's ad revenue is surging, and Google Cloud's revenue more than doubled in a year. However, analysts suggest these gains may not yet justify the massive spending on AI.

Philipp Schindler, Alphabet's senior vice president and chief business officer, acknowledged that Google Cloud's growth has impacted the core Search business. He noted that strong growth in AI Mode queries had an impact because of lower monetization in that area. Search ad revenue grew 12% in the third quarter, down from 17% growth in the same period last year.

Anthropic, an AI startup, updated its S-1 prospectus this week to reveal third-quarter revenue of $17 billion, a more than 1,000% increase from last year. However, its compute costs were $17.5 billion, leaving the company with net losses. Anthropic has committed nearly $900 billion in future compute and infrastructure costs and plans to build its own data centers.