Mark Zuckerberg, chief executive officer of Meta Platforms Inc., during the Meta Connect event in Menlo Park, California, US, on Wednesday, Sept. 17, 2025.
David Paul Morris | Bloomberg | Getty Images
The tech sector’s internet giants have concluded their earnings season, delivering a unified message to Wall Street: Artificial intelligence investments are poised for substantial growth. This commitment is not just a strategic pivot but a fundamental shift in capital allocation, promising both significant opportunities and potential risks.
Alphabet, Meta, Microsoft, and Amazon have collectively revised their capital expenditure guidance upwards, now anticipating a combined investment exceeding $380 billion this year. Microsoft’s projection extends to fiscal year 2026, ending in June.
These companies are engaged in a high-stakes race to develop the infrastructure required to meet the burgeoning demand for AI services. Demand appears virtually limitless. This surge in demand is driven by advancements in generative AI, machine learning, and the broader adoption of AI-powered solutions across industries.
However, the unparalleled scale of these investments has sparked skepticism. Critics are expressing concerns that the current spending levels may be inflating an AI bubble, questioning the long-term sustainability and the availability of sufficient resources, including energy and computing power, to transform ambitious AI visions into tangible realities. The substantial capital outlays required for AI infrastructure raise questions about ROI timelines and the potential for diminishing returns.
While the investment projections from these tech giants are considerable, they pale in comparison to OpenAI’s recent infrastructure deals, valued at approximately $1 trillion. These agreements, forged with industry leaders such as Nvidia, Oracle, and Broadcom, signal a deep commitment to rapidly scaling AI capabilities and underscore the competitive pressures driving investment decisions.
Investor responses to the megacap earnings reports were varied, reflecting the nuanced perspectives on the AI investment landscape.
Amazon’s stock experienced a surge following the company’s positive earnings and revenue results. The company projects capital expenditures of approximately $125 billion this year, an increase from the initial forecast of $118 billion.
“We’ll continue to make significant investments, especially in AI,” finance chief Brian Olsavsky said on the earnings call, adding that the number will grow in 2026. “We believe it to be a massive opportunity with the potential for strong returns on invested capital over the long term.”
Alphabet also garnered investor approval, reporting strong earnings and increasing its capital expenditure forecast for the year to a range of $91 billion to $93 billion, revised from the previous range of $75 billion to $85 billion. The company’s stock rose 2.5% on Thursday.
Despite exceeding expectations, Microsoft’s shares declined by about 3%. Investors may be factoring in longer term investment horizons and the challenges of monetizing AI investments quickly.
CFO Amy Hood indicated on the earnings call that capital expenditure growth would accelerate in fiscal 2026, which started in July, after the company had previously said growth would slow. Capex rose 45% to $64.55 billion last fiscal year, suggesting a minimum of about $94 billion in 2026. That number is significantly higher when including leases.
Meta’s stock, however, faced a more significant downturn, plummeting 11% on Thursday, marking its most substantial drop in three years, despite broadly positive earnings results. The company narrowed its capital expenditure guidance to a range of $70 billion to $72 billion, from a prior range of $66 billion to $72 billion. This correction points to investor unease regarding Meta’s AI strategy and its potential financial implications.
‘Unknown revenue opportunity’
Unlike Amazon, Microsoft and Google, Meta doesn’t have a cloud service and lacks a clear revenue story that’s tied to its AI investments.
Meta says its benefits from AI come elsewhere, namely improved performance in its core digital ads business from better targeting.
Still, analysts at Oppenheimer downgraded the stock to the equivalent of a hold from buy, citing an “unknown revenue opportunity” in what the company is calling superintelligence, and said investors will struggle with “aggressive revenue growth offset by high spending.”
Google, by contrast, has “predictable earnings,” the analysts wrote.
Meta CEO Mark Zuckerberg announced in June the creation of the company’s Superintelligence Labs, and said it would be led by some of his company’s costly high-profile hires, including Scale AI ex-CEO Alexandr Wang and former GitHub CEO Nat Friedman.
The lab would house the company’s various teams working on foundation models, Zuckerberg wrote in a memo at the time.
“I’m optimistic that this new influx of talent and parallel approach to model development will set us up to deliver on the promise of personal superintelligence for everyone,” Zuckerberg wrote.
But the Oppenheimer analysts said it’s an approach that “mirrors” the company’s metaverse spending in 2021 and 2022, when Zuckerberg was declaring that platform to be the future of computing.
Meta is still burning billions of dollars a quarter on its investments in augmented reality. The company said in its earnings report that its Reality Labs unit lost $4.4 billion in the quarter on $470 million in revenue.
‘No end in sight’
Microsoft CEO Satya Nadella speaks at Microsoft Build AI Day in Jakarta, Indonesia, on April 30, 2024.
Adek Berry | AFP | Getty Images
For the other hyperscalers, investments in AI largely tie into their cloud infrastructure businesses, even as they’re using AI companywide.
Within cloud computing, Amazon Web Services is still bigger than Microsoft Azure or Google Cloud, but it’s growing more slowly than its rivals.
AWS reported revenue growth in the third quarter of 20% to $33 billion. Microsoft said Azure revenue increased by 40%, while Google’s cloud sales rose 34% to $15.15 billion.
Analysts at Cantor said that clouds with “expansive service stacks like Microsoft” are in a position to benefit from this “heightened phase of AI infrastructure build out.”
They recommend buying the stock, but see reasons to be worried about the spending forecast. The analysts said that total capex, which includes capital leases, is poised to reach $140 billion this year, up 58% from a year earlier and triple the figure from fiscal 2024.
That number “is reflective of strong demand on the positive side, but remains a concern as there appears no end in sight,” the analysts wrote.
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