How staggering are 5 Tech giants’ AI capital expense

AI capital expense

Capital expense hurts stock price

Investors don’t like capital expense

As the artificial intelligence (AI) arms race continues to intensify, companies’ aggressive AI capital expense, raising concerns about the sustainability of future cash flows and shareholder returns. In the capital market, high capital expenditures are often viewed as profit erosion, sparking investor concerns.

Wall Street Favors Asset-Light Companies

For years, a key reason investors have favored these companies has been their “asset-light” nature—tech giants generate profits through intangible assets like intellectual property, software, and digital platforms with “network effects.” Users flock to Facebook, Google Search, iPhones, and Windows because other users also use them. This means that tech giants can grow their revenues with little need for additional construction and equipment costs—making them cash generators.

AI Upends Conventional Perceptions

However, in the AI spending wars that have plagued the industry through the first half of 2025, AI investments by some giants have not only not eroded profits but have actually generated stronger growth, supporting further spending increases.

Meta’s AI investments have directly translated into advertising revenue growth, sending its stock price soaring. Microsoft’s market capitalization has surpassed $4 trillion thanks to the growth of its AI-driven cloud business. Alphabet’s massive AI investments are also beginning to bear fruit.

Except for Apple, the other four major tech companies have invested heavily in AI and data center infrastructure, with combined capital expenditures reaching $95 billion in the second quarter of 2025.

Stunning AI Capital Expense

Shocking Data

Data shows that since the first quarter of 2023, investment in information technology (IC) equipment in the United States has grown by 23% after adjusting for inflation, while overall US gross domestic product (GDP) has grown by only 6% over the same period. In the first half of this year, ICP investment contributed more than half of the overall 1.2% GDP growth in the United States.

On par with EU’s annual defense spending

The five largest tech giants, represented by Meta, Microsoft, Alphabet, Amazon, and Apple, are spending staggering amounts on AI capital expenditures. Spending on AI infrastructure is projected to approach $400 billion in 2025, even exceeding the EU’s defense budget for the entire year of 2024. Amazon, Alphabet, Microsoft, and Meta reported $100 billion in capital expenditures for fiscal year 2025, up from their previous forecast of approximately $325 billion. These tech giants’ AI capital expenditures are expected to contribute 0.5 percentage points to US GDP between 2024 and 2025.

High capital expense supported by investors

Investors appear largely unimpressed by the astonishing growth in AI capital expenditures by the five largest tech giants. In the two weeks between the release of second-quarter earnings, three of the four tech giants saw their stock prices soar after releasing their latest quarterly reports, which showed that the companies generally outperformed Wall Street expectations and raised their capital spending forecasts. Meta and Microsoft shares rose approximately 11% and 4%, respectively, in trading on July 31st, the afternoon after they released their quarterly results. Microsoft’s surge briefly pushed its market capitalization above $4 trillion for the first time. Alphabet’s stock also rose after its earnings report on July 24th.

Spending by the Big Five Tech Giants

Microsoft

Microsoft reported $88.7 billion in capital expenditures for fiscal year 2025, ending June 30th, higher than its previous forecast of $80 billion. The company indicated that its spending growth will slow in fiscal year 2026. In the first quarter, it expected to spend $30 billion, a 50% year-over-year increase.

Currently, only Microsoft has shown signs that spending growth may slow in the near term. Microsoft reported $24 billion in capital expenditures for the quarter, of which $6.5 billion was non-cash leases, bringing its actual cash outlay to approximately $17 billion. This is comparable to Alphabet and Meta, making it one of the few tech giants using lease financing to mitigate cash flow pressure.

Meta

Meta expects fiscal 2025 spending to be between $66 billion and $72 billion, compared to the previous range of $64 billion to $72 billion given in May. Meta subsequently raised its capital expenditure guidance for both 2025 and 2026. The CFO stated on the earnings call that the company plans to “significantly increase AI-related investments” in 2026.

Alphabet

Alphabet also significantly increased its capital expenditure forecast for 2026. Alphabet CFO Anat Ashkenazi said the tech giant will spend $85 billion in 2025, rather than the previously estimated $75 billion, “given strong demand for our cloud products and services.”

Amazon

Amazon is an exception. After the company raised its capital expenditure forecast, its stock price fell 8% the day after its second-quarter earnings report. Amazon’s AWS cloud business is lagging behind competitors in growth, raising questions about its AI strategy. However, Amazon’s AWS cloud computing unit’s operating income guidance fell short of expectations, raising questions about its AI plans.

Amazon said its second-quarter capital expenditure of $31.4 billion is “partially representative of our quarterly capital investment pace in the second half of the year,” implying spending for the full fiscal year of approximately $118.5 billion. Amazon led the pack with $31 billion in capital expenditures, using nearly all of its operating cash flow, and expects to invest approximately $60 billion more in the second half of the year, bringing the full-year total to $115 billion. This figure also includes investments in retail areas such as warehousing, logistics, and automation equipment.

Apple

Apple began publicly announcing its capital spending plans in the United States in 2018, during Trump’s first term, at approximately $70 billion annually. In February 2025, it pledged $125 billion annually, and an announcement on August 6, 2025, raised that figure to $150 billion. Apple also announced in the August 6, 2025, announcement that it would expand its existing AI data centers in North Carolina, Iowa, Nevada, and Oregon. The company has previously highlighted these data centers in its spending commitments. The company’s data center capital expenditures are only about $10 billion a year.

Apple’s investment in AI is relatively conservative, with capital expenditures of only $3.5 billion in the second quarter, yet this represents a 61% year-over-year increase. Wall Street is beginning to view Apple as a laggard. Its conservative investment in AI and internal challenges have raised concerns about its future innovation capabilities, with some analysts even stating that acquisitions are its only path forward.

Apple is investing heavily in AI, with 40% of the 12,000 new employees hired over the past year in R&D positions. During the second-quarter earnings call, Cook stated that Apple is investing heavily in artificial intelligence and may acquire another company.

AI capital expense

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Author: Andy Lin

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