According to the latest projections from four major US technology companies, their combined capital expenditure is expected to reach approximately $650 billion by 2026. This staggering sum will be allocated to the construction of new data centers and a wide range of equipment, including artificial intelligence (AI) chips, network cables, and backup generators.
In an effort to dominate the still-developing artificial intelligence market, Alphabet (Google's parent company), Amazon, Meta Platforms, and Microsoft are planning capital expenditure on a scale unprecedented this century. To find historical parallels for these exceptionally high spending forecasts, one would need to look back to the 1990s dot-com bubble, or possibly even further to the 19th-century construction of the US railroad network, post-World War II US government investment in interstate highways, or New Deal-era relief programs.
The combined capital expenditure of these tech giants is projected to increase by about 60% compared to the previous year, indicating another acceleration in the global wave of data center construction. These massive data center facilities consume enormous amounts of electricity, straining regional energy supplies and raising concerns about rising power prices. Furthermore, the large-scale AI infrastructure investments by a few well-funded technology giants could distort macroeconomic data, given their growing share of US economic activity.
DA Davidson analyst Gil Luria stated that these four companies view the AI computing power competition as the next "winner-takes-all" market, and none are willing to lose this race.
Last week, Meta forecasted its full-year capital expenditure could reach as high as $135 billion, an increase of approximately 87%. On the same day, Microsoft reported a 66% year-over-year increase in capital expenditure for its second fiscal quarter, exceeding expectations. Analysts predict Microsoft's capital expenditure for the fiscal year ending in June will approach $105 billion. Following its earnings report, Microsoft's market capitalization decreased by $357 billion the next day, marking the second-largest single-day loss in stock market history.
The capital expenditure forecast released by Alphabet on Wednesday also unsettled investors, with its spending plan of up to $185 billion surpassing analyst expectations. On Thursday, Amazon projected in its earnings report that 2026 capital expenditure could reach $200 billion, causing its stock price to drop significantly in after-hours trading.