AI Tech Buildout: Until Someone Stops the Spending, Returns Remain Unclear
Spending keeps climbing
Amazon, Microsoft, Alphabet and Meta outlined plans to spend at least $720 billion on capital expenditures this year. Most of the money is expected to go toward AI infrastructure, in addition to at least $1 trillion in commitments arranged for future years.
The plans helped trigger a sharp selloff in technology stocks last week. Shares began recovering Tuesday as investors turned their attention to midterm election results, including victories by candidates who favor data center moratoriums or other limits.
Investors want returns
The companies reported strong revenue in parts of their businesses: Amazon had its fastest growth in five years for the quarter, Meta’s advertising revenue was rising, and Google Cloud revenue more than doubled in a year. Yet investors are increasingly asking whether that growth can justify the scale of AI spending and when the investment might pay off.
The article says the companies have not yet made substantial money from AI, despite more than three years of investment. Their leaders have continued to signal that spending will rise rather than slow.
Google faces a trade-off
Schindler said stronger use of AI Mode queries affected revenue because those queries were less monetized. Search advertising revenue grew 12 percent in the third quarter, down from 17 percent in the same quarter a year earlier. He said Alphabet’s ad experiments showed promise but gave no specific examples.
Alphabet shares fell 13 percent on Thursday, their largest one-day drop in history, before beginning to recover this week. The company plans $195 billion to $205 billion in capital expenditures this year, and CFO Anat Ashkenazi said spending would increase “significantly” in 2027.
Key points
- The four companies plan at least $720 billion in capital spending this year, mostly for AI infrastructure.
- Investors are questioning when AI investments will deliver returns.
- Google’s AI Mode is less monetized and has affected Search revenue growth.
- Election results could lead to data center moratoriums or other restrictions.