At a Glance

  • According to CFO Dive's analysis of Microsoft, Alphabet, Amazon, and Meta's financial reports, the four companies' combined capital expenditures jumped to $112.5 billion in the last quarter, up 77% year-over-year.
  • Microsoft led with $34.9 billion in capital expenditures, followed closely by Amazon at $34.2 billion; Alphabet and Meta's capital expenditures rose to $24 billion and $19.4 billion, respectively. This surge comes amid tech giants' race to bet on artificial intelligence.
  • "These numbers are eye-popping, and I think they're going to continue to go higher," Gene Munster, managing partner at investment firm Deepwater Asset Management, told CNBC in a television interview last week. "We will eventually slow down... but I think that day is far away."

Deep Dive

According to a recent survey by financial software maker OneStream, CFOs in the U.S. and other countries are feeling pressure from boards and investors to invest in AI. Among surveyed finance executives, nearly 97% said their boards expect regular updates on AI investments and progress, with cost savings (66%), return on investment (65%), and productivity gains (63%) cited as the most important metrics, according to a related press release.

The latest earnings season, which kicked off last week, shows that despite growing investor concerns about an AI investment bubble, major tech giants like Microsoft and Amazon remain optimistic about AI spending.

"We will continue to invest heavily, especially in artificial intelligence, because we believe it's a huge opportunity that could yield strong capital returns over the long term," Amazon CFO Brian Olsavsky said on the company's earnings call last Thursday.

Amazon's third-quarter net sales rose 13% to $180.2 billion, compared with $158.9 billion in the same period last year. The tech giant's total capital expenditures of $34.2 billion last quarter increased about 60% year-over-year.

Olsavsky said the company expects full-year capital expenditures of approximately $125 billion, and that figure is expected to continue increasing in 2026.

Microsoft and Alphabet's capital expenditures rose 74.5% and 84.6% year-over-year, respectively, last quarter. Among the four tech giants, Meta saw the largest increase in capital expenditures at 110.9%.

Although all companies posted revenue growth, Wall Street's reaction to the earnings results was mixed last week.

Alphabet and Amazon saw their stock prices rise after reporting earnings, but Microsoft and Meta shares fell. Meta's decline was particularly notable, dropping more than 10% on Thursday. According to Forbes, Meta's sell-off was mainly driven by its increased capital expenditures, "but without a clear path to generating significant new revenue from the investments."

According to a recent Morningstar article by Larry Swedroe, a financial advisor and former director of research at wealth management firm Buckingham Wealth Partners, tech giants' current AI spending relative to GDP has already exceeded the peak of the internet boom era.

Swedroe noted that this scale of investment would require generating $2 trillion in annual revenue by 2030 to justify its cost, while current AI-related revenue is only $20 billion—requiring a 100-fold increase.

"While the optimal strategy would be moderate, coordinated investment, every company fears being left behind," he wrote. "This forces all players to spend aggressively, and even if individual companies succeed technologically, it could destroy the industry's profit pool."

The article is based on a research paper by Kai Wu, chief investment officer at investment management firm Sparkline Capital.