Google’s Big Tech earnings season begins next week, but the most important numbers aren’t profits or sales. The key question will be how much these companies say they will spend on AI data centers.
Google, Amazon, Microsoft, and Meta have already announced plans to spend more than $700 billion this year. Investors know that companies are racing to add computing power. The more difficult question is how much additional capacity that money can actually buy.
The answer is getting worse. The price of memory chips is soaring, while power equipment, construction materials, skilled labor and electrical connections are all becoming harder to come by.
Morgan Stanley estimates that the cost of building 1 gigawatt of AI capacity across some major systems is currently rising by about 20%. For example, one common setup based on Nvidia has increased from about $29 billion to $35 billion per gigawatt. The new version rose from $41 billion to $49 billion.
That creates a nasty loop. Big Tech has ordered more AI data center equipment. The shortage will get worse. Prices will rise. Companies then raise their spending forecasts to cover these price increases, which creates more demand and drives prices up even more.
Brad Gastwirth, head of research at Circular Technology, predicts that about 20% to 30% of the next increase in AI capital spending will reflect inflation, with 70% to 80% still representing substantial expansion. In other words, increased spending does not necessarily mean AI augmentation is accelerating at the same rate.
“Investors need to be careful when interpreting increases in capital spending; there is absolutely an element of inflation,” Gastworth told me recently.
This difference is important to investors. Previous research has found that roughly 45% of the growth in capital spending by major cloud companies this year could be explained by soaring memory prices.
Cantor Fitzgerald analysts expect little change in 2026 capital spending plans this earnings season, but forecasts for 2027 will increase significantly, including $283 billion for Google, $271 billion for Amazon, and $200 billion for Meta.
So will anyone blink and stop increasing capital spending? Probably not yet. No company wants to be cautious as AI rivals scramble to get ahead. But be careful about what comes with this increase in spending.
“When companies talk about capital spending, I’m going to pay close attention to whether they’re also talking about power capacity, GPU deployments, memory purchases, networking, new data center campuses,” Gastworth said. “When capital spending increases along these metrics, it indicates true expansion, not just cost increases.”
Without these details, higher capital expenditure numbers may simply mean big tech companies are paying more to stay afloat.
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