America’s largest tech companies are taking an unprecedented financial gamble as much of the world grapples with inflation and geopolitical upheaval. New data revealed in US media over the weekend shows that five major artificial intelligence companies (Amazon, Google, Microsoft, Meta, and Oracle) plan to pour a staggering $700 billion into AI infrastructure in 2026.
A market with a scale that is difficult to grasp and concerns are rising
This number is nearly double last year’s total and represents three-quarters of the entire U.S. defense budget. It also exceeds the GDP of countries such as Israel and Switzerland. The bulk of this capital expenditure (CapEx) will go toward building large data centers and purchasing advanced chips to power generative AI systems.
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Mark Zuckerberg, Jeff Bezos, Elon Musk
(Photo: AP/Julia Demaree Nickinson)
Amazon alone has said it will spend $200 billion this year, while Google plans to invest about $180 billion to ensure its dominance in the next technology era. But as these companies soar, there are signs of unease on Wall Street. Amazon’s stock price, for example, plummeted on news of the spending hike, as investors worried that revenues from AI services weren’t growing fast enough to justify such a huge investment.
This AI investment boom is more than just numbers on a spreadsheet. It is reshaping the real world economy. A surge in demand for memory chips and computing components to power AI data centers is creating a global shortage of parts needed for traditional consumer electronics. Apple has already notified investors about supply issues for certain chips used in iPhones and Macs, as the chipmaker prioritizes the more profitable server market.
Meanwhile, a data center construction boom is draining resources from the broader construction industry in both the United States and Europe. Labor shortages and raw material constraints are being redirected to support tech giants’ megaprojects, raising the cost of building homes and offices and exacerbating the housing crisis in many cities.
The situation has become so extreme that the number of skilled tradesmen such as electricians and plumbers is decreasing and their resources are becoming increasingly expensive. Virtually every area related to data center construction and maintenance is a bumper crop of business.
Tech giants double down
As Nvidia remains the undisputed champion of chip manufacturing in the AI boom, its rivals are no longer standing still either. AMD launched its MI300 series to compete with Nvidia’s dominant H100 chips, while Intel is vying for relevance with its Gaudi 3 processors, which are based on the expertise of Israeli startup Habana Labs.
Meanwhile, China is pumping billions of dollars into domestic infrastructure through tech giants like Alibaba and Baidu, aiming to reduce its dependence on Western technology despite U.S. export restrictions. In Europe, there is a focus on “digital sovereignty,” with EU countries working to build independent data centers to prevent their citizens’ information from falling into the exclusive hands of the United States.
To understand how we got to this point, we need to trace back the roots of AI to the 1990s. The fundamental technology behind today’s artificial intelligence, the graphics processing unit (GPU), was originally developed for gaming. Companies like Nvidia and ATI (later acquired by AMD) focused on parallel pixel rendering for video games.
Only in the early 2010s did researchers discover that this same architecture was ideal for training neural networks, the backbone of modern AI systems.
The current infrastructure frenzy reflects the historical scale and skepticism surrounding 19th-century railroad expansion and the fiber-optic internet boom of the late 1990s. In both cases, large upfront investments ultimately led to transformative long-term economic growth.
The question remains whether AI will deliver the dramatic increases in productivity that economists hope. Some have warned that we may be witnessing the formation of the largest financial bubble in history, a risk for which there is currently no clear answer.
But what is certain is that the tech giants have passed the point of no return. They are mortgaging their future profits to build the infrastructure of a new world, changing the priorities of the global economy in the process.
For Israeli consumers, the impact may first be felt as higher prices for computers and smartphones. But the deeper changes are much more profound. It is a fundamental transformation of the world’s workforce and humanity’s technological capabilities over the next decade.
