OpenAI’s Spending Fuels Wall Street’s Capex Focus in Big Tech Earnings

The unprecedented capital investments announced by OpenAI and the hyperscalers underscore the escalating race to build out the infrastructure underpinning the artificial intelligence revolution. As investors prepare for a deluge of earnings reports this week, capital expenditure plans will be under intense scrutiny.

Microsoft, Alphabet, Meta, and Amazon are all slated to announce their quarterly results. While these companies operate in diverse sectors and often compete directly, Wall Street’s focus will be squarely on their capital expenditures. The investment narrative is straightforward: AI development demands massive computational power, translating to substantial infrastructure investments.

“We’re witnessing a significant commitment from these companies to invest heavily,” said Melissa Otto, head of Visible Alpha Research at S&P Global. “It will be crucial to understand their investment trajectory and whether they anticipate any slowdown in the near future.” The AI frenzy has gripped the market for nearly three years, fueled by the transformative potential of generative AI chatbots such as OpenAI’s ChatGPT and Google’s Gemini across vast sectors of the economy.

Currently, the primary bottleneck lies in the scarcity of computing capacity and power. Companies are unveiling ambitious plans to construct massive supercomputing data centers, largely powered by Nvidia AI chips, to meet the projected demand. OpenAI, a private entity valued at $500 billion, has notably declared future infrastructure developments totaling approximately $1 trillion, partnering with Nvidia, Oracle, and Broadcom, among others. These investments are not merely about raw computing power; they represent a deep commitment to the future of AI and a bet that demand will continue to surge.

Beyond OpenAI, the major hyperscalers are making significant investments. Investors will be seeking aggressive plans backed by clear strategies, but unlike OpenAI, these publicly held companies must balance their AI ambitions with market expectations. Overly aggressive spending could trigger investor concerns and negatively impact stock performance. Morgan Stanley analysts projected in a recent note that total hyperscaler capital expenditures could grow 24% next year, reaching nearly $550 billion. This figure represents a considerable financial commitment and underscores the intensity of the race for AI dominance.

Furthermore, companies must demonstrate corresponding revenue growth, particularly Amazon, Microsoft, and Google, who are vying for leadership in the cloud-based AI market. “There are trillions of dollars being earmarked relative to hundreds of billions of dollars of free cash flow generated by the Mag 7,” Lauren Taylor Wolfe, co-founder of Impactive Capital, noted recently, hinting at concerns about the pace of returns relative to investments.

Analysts will also be paying close attention to the impact of Microsoft’s Copilot AI features on the growth of other business segments. It is equally important to assess whether Google’s AI investments are effectively safeguarding its core search and advertising business. Meta has stated that its generative AI technology has boosted the company’s ad targeting capabilities, mitigating challenges posed by privacy updates.

Apple is also issuing earnings this week. So far, the iPhone maker has occupied a unique position in the AI landscape, as it does not operate a public cloud service or develop large language models for public consumption. However, Apple CEO Tim Cook has stated that the company intends to increase its capital spending on AI. This suggests that AI will be a more prominent topic in their upcoming earnings report, which could signal a strategic shift for the company.

Here’s a preview of what the hyperscalers have communicated thus far, and what Wall Street anticipates:

Microsoft reported in July that it projected capital expenditures of $30 billion for the quarter, a year-over-year increase of more than 50%. However, CFO Amy Hood told investors that while capex would continue to increase in fiscal 2026, the growth rate would be slower than in fiscal 2025.

According to FactSet, analysts predict a 42% rise in capex this fiscal year, reaching $91.3 billion, following a 45% rise in the previous year. The AI demand is straining infrastructure, according to Hood on the most recent earnings call. “I talked about in January, and said I thought we’d be in better supply-demand shape by June,” she stated “And now I’m saying I hope I’m in better shape by December.”

Alphabet had projected capex of $85 billion this year, up from a previous target of $75 billion. CFO Anat Ashkenazi reported in July that the business expected to raise that amount again in 2026, and that Alphabet monitors demand to guarantee no money is wasted.

“We have a highly rigorous process to determine the demand behind it, and then the allocation of the compute associated with our technical infrastructure investments, ensuring that we’re utilizing that appropriately,” Ashkenazi said.

She added that Google’s capital expenditures also support the company’s own products, like Gmail, Google Maps and YouTube, in addition to serving cloud customers and AI lab DeepMind.

Following Anthropic’s announcement, Google will most likely need to increase capacity. It reserved as many as 1 million of the company’s TPU AI chips next year that is a major AI lab deal worth tens of billions of dollars.

According to FactSet, experts predict a 57% rise in capex for 2025 (to $82.4 billion), compared to a 63% rise the previous year. They predict that growth will slow to 12% the following year, reaching $92.6 billion.

Meta raised its 2025 capex projection by $1 billion to $69 billion over the summer.

Although Meta does not have a cloud service that it rents to customers, CEO Mark Zuckerberg has emphasized the significance of the company’s AI infrastructure. He emphasized that it gives the business an advantage in ad delivery and in the development of new kinds of feeds, like its AI-generated video app Vibes.

“We’re making all these investments because we have conviction that superintelligence is going to improve every aspect of what we do,” Zuckerberg said in July.

Zuckerberg has also formed a partnership with Nvidia CEO Jensen Huang, who stated at an investor event in October that Facebook employed Nvidia chips to build extremely effective ad targeting algorithms.

After Apple implemented a new privacy system in 2021, Meta’s ad business suffered, making it more difficult to target users on mobile devices. Huang stated that in resolving the issue, Meta “fixed that with AI powered by Nvidia GPUs.”

According to a FactSet poll, analysts predict that Meta will post an 84% increase in capex this year, reaching $68.4 billion, up from 37% in 2024. In 2026, they anticipate a 42% increase to $97 billion.

Amazon CEO Andy Jassy attempted to reassure investors three months ago that Amazon Web Services has kept a “pretty significant” leading position with regard to its cloud competitors. Also, he voiced optimism about its AI offerings. Microsoft Azure and Google’s cloud segment, however, have grown more quickly.

Amazon intends to invest more than $100 billion in capital expenditures this year. While it did not raise its target in July, it did indicate quarterly capex of around $31 billion in the year’s final two quarters.

“We will continue to invest more capital in chips, data centers, and power to pursue this unusually large opportunity that we have in generative AI,” CFO Brian Olsavsky told investors.

Olsavsky indicated that a large portion of Amazon’s expenditure was allocated to the company’s custom AI chip, called Trainium, as well as other technological infrastructure. He did point out, however, that Amazon’s expenditures also support the transportation and fulfillment network that provides packages to customers.

According to FactSet, analysts predict a 41% gain in capex this year, reaching $117 billion, compared to a 57% increase in 2024. They anticipate that growth will slow to roughly 8% the following year, reaching $126.6 billion.

Apple’s spending is a small compared to its rivals.

In fiscal 2024, the company’s capex was $9.4 billion, around 2% of total revenue. That was lower than the year before.

Analysts predict 28% increase for fiscal 2025, which finished in September, reaching $12.1 billion. In 2026, they anticipate an 19% increase, reaching $14.4 billion.

Apple executives stated that because of the company’s “hybrid” strategy of renting most of the computing power it requires from cloud providers, those charges become operating expenses.

Cook has stated that this may change, while the firm does not give an official estimate for future capex.

“We are also significantly growing our investments,” Cook told investors this summer.

CFO Kevin Parekh stated, “You are going to continue to see our capex grow,” adding that, “It’s not going to be exponential growth, but it is going to grow substantially.”