Big Tech is taking the AI era to a whole new level.
When Amazon, Alphabet, Microsoft, and Meta recently released their earnings, one number caught our attention. That’s a huge forecast for data center spending this year.
Industry capital spending (spending on property, plant and equipment) has increased in recent years and is on track to significantly exceed private sector infrastructure spending in modern history by 2026.
The prediction draws comparisons to previous eras of transformation, such as the Gilded Age of the late 1800s and the Information Age of the 1990s.
Still, Wall Street is questioning whether it will deliver a return on investment, and investors are starting to get nervous. As of Friday morning, Amazon, Microsoft, and Meta’s stock prices were all lower. Microsoft rose slightly.
“Investors needed more than a promise to buy into this story,” Bernstein analyst Mark Schmulik wrote Thursday in a research note after Amazon’s earnings.
Amazon took the cake by promising $200 billion.
Amazon said Thursday it plans to spend $200 billion in capital spending this year, an increase of more than 50% from 2025 and the largest estimated budget among Big Tech companies.
That forecast was $50 billion higher than analysts expected, but analysts were less than impressed, even though Amazon’s sales for the quarter rose 14% from a year earlier.
The company’s shares fell as much as 10% after the bell on Thursday and were down 8% Friday morning.
Bernstein’s Mr. Schmulik wrote in a tongue-in-cheek research note Thursday night that with such spending, any improvement in returns should be a “stake.”
“If Amazon was going to lock in its stock price to 2026 capital expenditures, Amazon might have been able to steer it even higher. Why not do that at this point?” Shmulik wrote.
Google doubled its budget for the second year in a row
Google’s parent company Alphabet surprised investors Wednesday by announcing that it plans capital spending of $175 billion to $185 billion in 2026, doubling its budget for the second year in a row.
Google, which lags behind Amazon and Microsoft in cloud services, has dramatically increased spending as demand for its Gemini AI model grows. Gemini has more than 750 million monthly active users, the company announced in its fourth quarter earnings call.
Google stock fell about 2% Friday morning as investors digested Big Tech’s massive spending plans for 2026.
One of the things Google is aiming for is growing enthusiasm for Gemini.
“We believe these investments make sense given the rapidly growing backlog and support our view that Alphabet is best positioned to emerge as one of the leading, if not leading, AI platforms,” BNP Paribas analyst Nick Jones said in a research note Thursday.
Mehta initially seemed to have the green light from investors.
Like its Big Tech peers, Meta plans to increase its AI investments in 2026. It was the only company that appeared to get a pass from investors this earnings season.
Meta announced last week that it plans to spend $115 billion to $135 billion in capital expenditures, nearly twice as much as last year. Meta’s stock price rose 8% on January 29, the morning after the company announced its fourth quarter results. Investors were pleased with the social media giant’s strong advertising business, which reported $58.14 billion in advertising revenue during the quarter. It also benefited from advertising AI tools.
Enthusiasm has since waned, with stocks trending lower this week.
Microsoft is betting big on OpenAI
Microsoft reported second quarter fiscal 2026 capital expenditures of $37.5 billion. The company has not released its full-year capital spending outlook, but S&P estimated last week that the number could be around $97.7 billion, with some analysts expecting it to be slightly higher.
Microsoft’s cloud business relies heavily on OpenAI. ChatGPT manufacturers account for 45% of the backlog, meaning Microsoft’s future cloud revenue will primarily depend on them. The company’s stock price fell 12% on January 29, the morning after last week’s earnings report, marking Microsoft’s biggest decline since March 2020.
Investors seemed pleased with the 17% increase in total revenue, including a 39% jump in revenue from Azure and other cloud services.
