Big Tech's AI Spending Spree: Reshaping the Economy and Raising Concerns

Big Tech's Big Bet on AI Driving $344 Billion in Spend This Year

If there's any lesson to take from the spending plans issued by the world's largest technology companies over the past two weeks, it's to never underestimate the fear of missing out. Microsoft Corp., which set a $24.2 billion capital spending record last quarter, plans to drop upwards of $30 billion in the current period. Amazon.com Inc. similarly spent $31.4 billion last quarter, almost double what it dropped a year ago, and is maintaining that level of investment. Google owner Alphabet Inc. raised its capital expenditures guidance this year to $85 billion.

Silicon Valley’s AI Spend Goes Berserk as Microsoft Starts Cashing In

Tech giants reported eye-watering figures linked to artificial intelligence investment. Meta, Apple, Microsoft, and Amazon all reported quarterly earnings this week, and there was a common thread tying them together: a boom in AI spending and plans to increase it even more, beyond analyst expectations. Although capital expenditures above expectations often don’t tend to make investors particularly happy, it had pretty much the opposite effect this week, especially for Meta and Microsoft, both of which saw a pop in their stock following the releases. And for Microsoft, which posted its largest ever quarterly capital expenditure forecast, the boost in shares led the tech giant to become the second-ever company to hit $4 trillion market valuation, when it briefly breached the threshold on Thursday. The move was largely because both Meta and Microsoft finally had the revenue to show for their investments. Meta’s ad revenue, which is a huge moneymaker for the tech giant, for the past quarter came in a couple billion dollars ahead of Wall Street expectations, and CEO Mark Zuckerberg attributed that to the deployment of artificial intelligence in the ad system. Zuckerberg went on to assure investors that this surprise increase in revenue was bound to continue, saying that his multi-billion dollar investment into building a team dedicated to creating “superintelligent†AI will lead to even more payoffs for its advertising business. Microsoft reported that sales were up 18% from last year and that revenue for its cloud computing platform Azure had surpassed $75 billion this fiscal year, up 34% from last year. Revenue from the company’s productivity and business processes segment also exceeded expectations, and company executives shared that the business software sales were boosted partially thanks to widespread adoption of its AI product Microsoft 365 Copilot. All the news combined brings to mind one question: Is Silicon Valley’s AI bet finally starting to pay off? Meta has been in the midst of a multi-billion dollar AI push after Zuckerberg admitted that the company had fallen behind competitors in the AI race. The push has been marked by high profile strategic talent hires, and particularly the poaching of OpenAI employees tempted by multi-year deals worth millions of dollars. In the meantime, the company is going all in on data centers as well. Last month, Zuckerberg said that Meta would be investing hundreds of billions of dollars into AI data centers. The company’s first of multiple multi-gigawatt data centers is to be unveiled next year, and Zuckerberg said in a post on his Threads account that just one of these data centers “covers a significant part of the footprint of Manhattan.†This week, Meta said it's expecting to shell out between $66 billion and $72 billion this year, and that it expects to spend even more next year on data centers and hiring. Microsoft, on the other hand, said that it is expecting to spend more than $100 billion next year, with much of it going toward AI. This upcoming quarter alone, the company is eyeing $30 billion in capital expenditures, again mostly for AI, in what is a record forecast for the company. Apple also posted better than expected revenue on its earnings report this week, but that was mostly attributable to iPhone sales. Despite that, CEO Tim Cook told investors during the company’s earnings call that the tech giant was planning to “significantly†increase its investments in AI to catch up with rivals and was open to acquisitions to do so. One of the biggest concerns when it comes to AI is regarding spending. Even though Silicon Valley is pouring in countless dollarsâ€"over $300 billion this year alone, according to numbers from the Financial Timesâ€"not everyone believes demand for AI will scale up accordingly. And if it does not, it would cause a major problem for the industry. In a paper published earlier last month, the Federal Reserve claimed the biggest challenge with generative AI was not the potential of the tech itself but rather getting people and businesses to actually use it. The technology isn’t necessarily adopted widely outside of tech, science, and finance fields, and is deployed mostly by large firms. As the technology gets better, demand for AI is bound to increase, too, but by just how much is a mystery. If that demand does not grow as expected, the Fed paper warns, it could have “disastrous consequences,†much like the railroad overexpansion of the 1800s and the economic depression that followed. The answer to whether or not AI demand will scale up to the level of investment is still not a definitive yes or a no, but this round of earnings gave a substantial dose of hope to the AI bulls. But the risk for overspending is still there, as the tech giants continue to make record pledges of investment: if the increase in investments isn’t followed by a tangible increase in demand and revenue, especially for the companies’ core businesses, then the possibility of “disastrous consequences†is still there.

Big Tech's hefty AI spending is reshaping the slowing economy

SAN FRANCISCO -- Big Tech's unprecedented spending spree on artificial intelligence is getting so big that it's starting to reshape the U.S. economy. Google, Meta, Amazon and Microsoft reaffirmed this past week that they are on track to spend more than $350 billion this year building and equipping AI data centers -- a massive influx of money that economists and analysts say could be a countervailing force to what appears to be a decelerating economy. Revised job numbers released Friday by the Labor Department suggest the U.S. job market appears weaker than previously understood, with employers pulling back sharply on new hiring in May and June. At the same time, Big Tech's infusion of cash will go toward building and expanding data centers, which could create more infrastructure jobs as well as higher demand for computer chips, servers and other network equipment that power them. AI investments could grow the economy by as much as 0.7 percent in 2025, according a calculation by Jens Nordvig, an economist and the founder of economic data platform Exante Data. That would represent half of the 1.4 percent growth projection for the U.S. economy this year from the Federal Reserve. Hefty AI spending is creating a situation where the U.S. economy is becoming even more dependent on Big Tech, raising concerns from some analysts and economists that should the AI boom slow down, it could further harm the economy. "The AI complex seems to be carrying the economy on its back now," said Callie Bost, a market strategist with investment firm Ritholtz Wealth Management. "In a healthy economy, consumers and businesses from all backgrounds and industries should be participating meaningfully. That's not the case right now." AI executives argue the spending boom will create more jobs and bring about scientific breakthroughs with advancements in the technology. OpenAI has said that once its AI data centers are built, the resulting economic boom will create "hundreds of thousands of American jobs." Meta CEO Mark Zuckerberg has been on an AI hiring spree that began in June, offering hundreds of millions of dollars in salaries as it launches a new team dedicated to creating "superintelligence," a term for machines hoped to one day outperform humans at every possible task. "AI will improve all our existing systems and enable the creation and discovery of new things that aren't imaginable today," Zuckerberg wrote in a July 30 manifesto laying out the company's AI plans, predicting the tech would usher in a "new era" of productivity and economic development. A handful of regions across the U.S., including Texas and Northern Virginia, may benefit from increased construction jobs as the data centers are built, but once they're up and running, they will require fewer people to maintain them. Nvidia, which is the biggest AI chip supplier in the world, brought in $44 billion in revenue in the most recent quarter alone. That company's stock has skyrocketed over the past two years, turning many of its individual employees with stock options into millionaires and some of its executives into billionaires. Wall Street has so far rewarded Big Tech companies for their spending on AI, increasing their market value and making them an even bigger part of the overall stock market. Microsoft, an investor in OpenAI, last week hit a $4 trillion market valuation after reporting strong earnings growth, the second company to hit that threshold after Nvidia. Meta's stock jumped 11 percent after reporting strong earnings and telling investors its AI spending would be on the high end of its previous predictions. Investor enthusiasm for AI has boosted the stock portfolios of many Americans, but if the economy sours, Big Tech stocks could be hit hard, impacting 401(k)s and investment portfolios, market strategists and investors say. "Recessions can snap your focus back to reality quickly, and what gets hit the worst in recession-fueled market sell-offs is high-valuation growth stocks," said Bost. Investment bank Raymond James said it expects the AI spending boom to continue for the "next couple years," but only if tech companies can show they're able to make real money from AI services. AI boosters argue that demand for the tech will increase exponentially as more people use it, but skeptics point out that the costs of AI services have already fallen as companies compete to drive them down and AI algorithms become more efficient. "This build out presumes something that isn't true and that is you can make a reasonable rate of return well into the future," said Paul Kedrosky, a tech investor and research affiliate at MIT's Initiative on the Digital Economy. There are also questions about whether all of the promised funding from AI companies will actually materialize. On the first day of Trump's term, he hosted OpenAI and Japanese investment giant SoftBank to announce the companies' plans to build $500 billion worth of data centers during Trump's presidency. But the companies also said not all of the funding for the project had been secured yet. Other big-ticket tech projects have failed to materialize in the past. During Trump's first term, Taiwanese tech manufacturer Foxconn unveiled plans to build a $10 billion facility in Wisconsin. It never opened. The tech industry has been feverishly investing in AI since OpenAI kicked off an arms race in late 2022 with the release of ChatGPT. The tech behind ChatGPT and other tools like Google's AI search answers demand more computational power than regular apps or internet searches. That means the companies must buy expensive computer chips manufactured abroad, and build energy-intensive data centers to keep them running around-the-clock. There aren't any signs Big Tech will slow down its AI spending. In earnings calls over the past two weeks, company executives said capital expenditures would keep growing. Google increased its planned spending to $85 billon from $75 billion. Amazon said it would likely overshoot its previous expectation of investing $100 billion this year. Meta said its spending would be as high as $72 billion in 2025 and would increase it even more in 2026. The companies have surpassed previous forecasts they've made. Microsoft said last week it is on track to spend $30 billion on AI in the current quarter. If that rate continues, the company will surpass its previous prediction of spending $80 billion on AI this year. The numbers are bigger than anything in the tech industry's history. From 2023 through the end of this year, Google, Microsoft, Meta and Amazon will spend more on new investments than they did for all the years from 2010 to 2022 combined, according to an analysis of historical spending by The Washington Post. That period covers a time in which Big Tech was growing rapidly, building new offices all over the world, constructing data centers to run cloud services and laying thousands of miles of transoceanic internet cables. The spending has also eclipsed other major tech projects in U.S. history. NASA's Apollo program cost around $25 billion, the agency told Congress in 1973. In today's dollars, that's around $180 billion, a fraction of what the tech industry will spend on AI this year alone. In China, which has its own AI spending boom as the country seeks to compete with the U.S. for control over the future of the technology, President Xi Jinping recently criticized local officials for investing too much in AI data centers. "The foundation of the (U.S.) economy is cracked, even if AI optimism is keeping the momentum going for now," said Bost.

Big tech has spent $155bn on AI this year. It's about to spend hundreds of billions more

Tech giants have spent more on AI than the US government has on education, jobs and social services in 2025 so far The US's largest companies have spent 2025 locked in a competition to spend more money than one another, lavishing $155bn on the development of artificial intelligence, more than the US government has spent on education, training, employment and social services in the 2025 fiscal year so far. Based on the most recent financial disclosures of Silicon Valley's biggest players, the race is about to accelerate to hundreds of billions in a single year. Over the past two weeks, Meta, Microsoft, Amazon, and Alphabet, Google's parent, have shared their quarterly public financial reports. Each disclosed that their year-to-date capital expenditure, a figure that refers to the money companies spend to acquire or upgrade tangible assets, already totals tens of billions. Capex, as the term is abbreviated, is a proxy for technology companies' spending on AI because the technology requires gargantuan investments in physical infrastructure, namely data centers, which require large amounts of power, water and expensive semiconductor chips. Google said during its most recent earnings call that its capital expenditure "primarily reflects investments in servers and data centers to support AI". Meta's year-to-date capital expenditure amounted to $30.7bn, doubling the $15.2bn figure from the same time last year, per its earnings report. For the most recent quarter alone, the company spent $17bn on capital expenditures, also double the same period in 2024, $8.5bn. Alphabet reported nearly $40bn in capex to date for the first two quarters of the current fiscal year, and Amazon reported $55.7bn. Microsoft said it would spend more than $30bn in the current quarter to build out the data centers powering its AI services. Microsoft CFO Amy Hood said the current quarter's capex would be at least 50% more than the outlay during the same period a year earlier and greater than the company's record capital expenditures of $24.2bn in the quarter to June. "We will continue to invest against the expansive opportunity ahead," Hood said. For the coming fiscal year, big tech's total capital expenditure is slated to balloon enormously, surpassing the already eye-popping sums of the previous year. Microsoft plans to unload about $100bn on AI in the next fiscal year, CEO Satya Nadella said Wednesday. Meta plans to spend between $66bn and $72bn. Alphabet plans to spend $85bn, significantly higher than its previous estimation of $75bn. Amazon estimated that its 2025 expenditure would come to $100bn as it plows money into Amazon Web Services, which analysts now expect to amount to $118bn. In total, the four tech companies will spend more than $400bn on capex in the coming year, according to the Wall Street Journal. The multibillion-dollar figures represent mammoth investments, which the Journal points out is larger than the European Union's quarterly spending on defense. However, the tech giants can't seem to spend enough for their investors. Microsoft, Google and Meta informed Wall Street analysts last quarter that their total capex would be higher than previously estimated. In the case of all three companies, investors were thrilled, and shares in each company soared after their respective earnings calls. Microsoft's market capitalization hit $4tn the day after its report. Even Apple, the cagiest of the tech giants, signaled that it would boost its spending on AI in the coming year by a major amount, either via internal investments or acquisitions. The company's quarterly capex rose to $3.46bn, up from $2.15bn during the same period last year. The iPhone maker reported blockbuster earnings Thursday, with rebounding iPhone sales and better-than-expected business in China, but it is still seen as lagging farthest behind on development and deployment of AI products among the tech giants. Tim Cook, Apple's CEO, said Thursday that the company was reallocating a "fair number" of employees to focus on artificial intelligence and that the "heart of our AI strategy" is to increase investments and "embed" AI across all of its devices and platforms. Cook refrained from disclosing exactly how much Apple is spending, however. "We are significantly growing our investment, I'm not putting specific numbers behind that," he said. Smaller players are trying to keep up with the incumbents' massive spending and capitalize on the gold rush. OpenAI announced at the end of the week of earnings that it had raised $8.3bn in investment, part of a planned $40bn round of funding, valuing the startup, whose ChatGPT chatbot kicked in 2022, at $300bn.

Behind the Curtain: AI is shouldering the American economy

Why it matters: A wild cycle is unfolding. The biggest companies in history are spending a stunning amount of money to fuel the AI revolution, driving demand for more chips, more energy and more capital. * This dynamic is basically powerful enough to cover for an economy that otherwise looks like it's weakening by the day. The big (Nvidia, Microsoft, Apple, Alphabet/Google, Amazon and Meta) are getting bigger, and burrowing deeper into direct investment and ownership of the products feeding into their AI. * They're buying up land, building data centers, sucking up chips, investing in energy sources. Microsoft and Nvidia together are worth about $2.5 trillion more today than they were a year ago. Alphabet, Google, Amazon and Meta together will spend nearly $400 billion this year on capital expenditures, largely to build AI infrastructure -- more than the EU spent on defense last year, The Wall Street Journal notes. * Investors are getting comfortable with the mammoth spending on this "capex war," as shown by Big Tech's runaway results last week, the Financial Times reports. The big picture: The Wall Street Journal's Christopher Mims captured the tectonic impact of the AI arms race in a must-read column, "Silicon Valley's New Strategy: Move Slow and Build Things." * "Call it an 'age of infrastructure,' in which companies spend vast sums on actual stuff," Mims wrote. "It's reminiscent of the age of business titans and 'robber barons' who dominated railroads, steel and other enterprises." * Paul Kedrosky -- a Ph.D. and trained engineer who became a tech founder, investor and pundit -- found that capital expenditures on AI data centers have passed the peak of telecom spending during the dot-com bubble (1995-2000) -- and are second only to railroads in the 1880s. "In a sense," Kedrosky writes, "there is a massive private sector stimulus program underway in the U.S." Think about that: A small number of companies -- some nearly the size of Germany's economy -- are spending more than the 340 million American consumers, whose status as the engine of the U.S. economy has always been all but gospel. * As Derek Thompson, co-author of the bestselling book "Abundance," put it after Friday's disappointing jobs report: "GDP is only growing because of AI capex." Zoom in: Investment in information processing equipment and in software increased at a 25% annual rate in the first half of the year -- while overall GDP rose at a paltry 1.2%, Axios chief economic correspondent Neil Irwin notes. * Neil Dutta of Renaissance Macro notes on X that this measure of AI capital spending has contributed more to growth this year than consumer spending. The big questions: Will U.S. workers -- not just tech giants and big shareholders -- benefit with better jobs and higher salaries? Will this boom ever bust? * The Wall Street Journal's Greg Ip points to "hidden risks from the AI boom": "No one doubts its potential to raise growth and productivity in the long run. But financing that boom is straining the companies and capital markets." * Econ blogger Noah Smith has an even more dire warning: With a "large and increasing amount of debt being used to fund one single sector of the economy (data centers)," a data-center bust could trigger a financial crisis. Between the lines: Theoretically, heavy investment backed by generous government incentives should, over time, create a new class of higher-end work to build, operate and maintain data, chips and energy centers. But these jobs need to more than offset the jobs AI wipes out. * "The AI layer is just the newest, the latest layer," Jay Timmons, president and CEO of the National Association of Manufacturers, tells Axios' managing editor for business Ben Berkowitz. "We have to be able to make sure we're ready for today with those skills." Reality check: Tech in general, and semiconductors in particular, have always been cyclical businesses. First, you overbuild, then you suffer through a glut, then there's a shortage -- and then you overbuild again, Axios managing editor for tech Scott Rosenberg notes. * It happened with memory chips at the start of the '90s. It happened with internet connectivity during the dotcom boom and bust. Plenty of people in the AI industry -- many of whom never lived through those cycles -- believe this time is different. * And data centers generate more direct jobs in their construction phase than once they're built. The bottom line: No one disputes that the vast majority of America's growth right now flows from AI investment competition. And it's only accelerating. * It's a steroid injected at a level and speed we've never seen. Go deeper ... "Behind the Curtain -- Jensen vs. Dario: "There will be more jobs."

Massive AI spending shows early payoff for Big Tech

The billions of dollars Big Tech has poured into artificial intelligence (AI) development seem to be paying off as companies show they can produce results, earning Wall Street's stamp of approval for now. After months of questions about whether major tech firms were overshooting AI spending, Google, Microsoft and Meta are taking a victory lap after outperforming investors' lofty expectations. "It's showing it's starting to pay off and companies are doubling down," Wedbush Securities analyst Dan Ives said, adding, "It puts fuel in the engine for tech to rally more in the second half [of the year]." Major tech firms promised eye-popping investments in AI heading into 2025, as they pushed to build out the data center infrastructure that is expected to underpin the development of frontier AI models -- a frenzy reinforced by President Trump's own AI infrastructure push. These investments, already under scrutiny because of their sheer size, faced additional pressure earlier this year with the emergence of DeepSeek. The Chinese AI startup released its R1 model, which it claimed could compete with top American AI models and was developed with a fraction of the infrastructure. However, the tech giants seem to have quieted critics so far with the results of their spending. Google kicked off a series of strong tech earnings last week, beating investor expectations with $96 billion in revenue and $28 billion in net income last quarter. The search giant, which initially planned to invest $75 billion in capital spending this year, also upped the ante with an additional $10 billion investment. This raised the bar for Microsoft and Meta coming into this week, said Dave Wagner, head of equity and portfolio manager at Aptus Capital Advisors. Microsoft did not disappoint, reporting $76 billion in revenue and $27 billion in net income last quarter. The company's cloud computing platform Azure surpassed $75 billion in revenue for the fiscal year, up 39 percent year-over-year in the last quarter. It also announced plans to invest another $30 billion in capital spending next quarter, after spending about $88 billion over the past year. The company's stock jumped Thursday on the strong earnings report, briefly boosting the company's market valuation above $4 trillion. It is only the second company in the world to cross the historic threshold, following Nvidia's lead last month. Check out the full report at TheHill.com tomorrow.

AI helps Big Tech score big numbers - The Economic Times

Each company in the big technology pack -- including Alphabet, Meta, Microsoft, and Amazon -- surpassed market expectations with stellar performance in the April-June quarter. Himanshi Lohchab brings out what stood out.The April-June quarter of 2025 proved stellar for the big technology pack: Alphabet, Meta, Microsoft, and Amazon, with each company surpassing market expectations. Alphabet's revenue showed that AI-led search is boosting earnings instead of cannibalising. Meta outperformed estimates due to AI-powered ad optimisation and Zuckerberg's aggressive vision for personal superintelligence. Microsoft Azure cloud surpassed $75 billion in annual run rate for the first time, zooming the stock to $4 trillion valuation - a feat achieved hitherto by AI hardware titan Nvidia. Cumulative capital spending across these firms ranges between $331 billion and $377 billion, and consumes up to 40% of sales and 80% of operating cash flow at some companies.

The AI race has Big Tech spending $344 billion this year

If there's any lesson to take from the spending plans issued by the world's largest technology companies over the past two weeks, it's to never underestimate the fear of missing out. Microsoft, which set a $24.2 billion capital spending record last quarter, plans to drop upward of $30 billion in the current period. Amazon.com similarly spent $31.4 billion last quarter, almost double what it dropped a year ago, and is maintaining that level of investment. Google owner Alphabet raised its capital expenditures guidance this year to $85 billion. Then there's Meta Platforms: The social networking giant lifted the low end of its forecast for 2025 capital expenditures and projected that costs will continue to grow at an even faster pace next year. Altogether, the four companies are expected to spend more than $344 billion for the year, with much of it going to the data centers necessary to run AI models.