Big Tech has shoved more than $1tn into AI infrastructure and now wants investors to admire the plumbing.
According to the Financial Times Google, Amazon, Microsoft and Meta have poured $1.1tn into capital spending since the AI gold rush began in 2023. Their latest earnings show the hyperscalers have turned from smug software rent collectors into builders of massive physical empires.
RBC Capital analyst Rishi Jaluria said: “There is basically no end in sight for the growth in capex. Investors need these companies to toe the tight line between investing in AI and not compromising the things that have made them successful.”
The four outfits expect to spend $745bn this year on data centres, advanced chips and the power needed to keep the whole circus humming. Google and Amazon have already nudged their spending plans upwards this quarter.
The bet still leans on OpenAI and Anthropic continuing to raise enough cash to honour vast, multiyear deals for computing power. Both AI labs are eyeing public listings, which means someone else may soon get a chance to buy into the spreadsheet madness.
The splurge has strained supply chains and driven up costs, including memory chip shortages that hurt the Fruity Cargo Cult Apple while it sits out much of the AI race. Job’s Mob warned of lower sales and margins from higher costs, sending its shares down 6.3 per cent on Thursday.
The cloud numbers were less grim for the rest of the pack. Google, Amazon and Microsoft all reported faster growth from flogging compute to AI outfits and corporate customers keen to sprinkle machine learning glitter on everything.
Meta has no cloud business, but claimed AI helped sharpen its advertising machine, with quarterly revenue rising 28 per cent year-on-year to $61bn. Meta chief executive Mark Zuckerberg told investors the outfit had “a large number of offers” to rent out its compute “at a meaningful premium over what we paid”.
Zuckerberg did not sound keen to become a landlord just yet. “There will continue to be a significantly higher margin on selling intelligence rather than selling compute directly”, he said.
SLC Management managing director Dec Mullarkey said Meta’s fuzzy plan helped explain its eight per cent share price fall after earnings.
“They are a bit all over the place. For investors it’s no longer growth at any cost; they want to see the spending flowing through to results, like at the Big Three,” Mullarkey said.
Google added $11bn of cloud revenue compared with last year, but investors still dumped the shares after it burned cash for the first time since going public more than 20 years ago. It posted negative free cash flow of $6bn for the quarter.
Google, Meta and Microsoft signed close to $900bn of new AI-linked obligations in the three-month period. Meta added $233bn of commitments in the quarter, then another $68bn in data centre leases in July, while Microsoft signed more than $130bn of new data centre leases.
Amazon chief executive Andy Jassy said the company would face free cash flow pressure as it built “many data centres simultaneously. In the short term, we’ll spend a lot of capex and encounter free cash flow headwinds until these data centres come online.”
The four groups’ combined free cash flow fell to a decade low of $7bn, with only Microsoft and Meta taking in more than they spent.
