Big Tech's AI Spending Soars to $155B, Set for Hundreds of Billions More
Major technology companies are engaged in an unprecedented spending spree on artificial intelligence (AI), with investments totaling $155 billion this year alone. This figure already surpasses the US government's expenditure on education, training, employment, and social services for the current fiscal year. Financial disclosures from Silicon Valley's leading firms indicate this intense competition is set to escalate dramatically, with hundreds of billions more anticipated to be invested within a single year.
The bulk of this investment, captured under capital expenditure (Capex), primarily targets the foundational infrastructure necessary for AI development: vast data centers, which demand significant power, water, and expensive semiconductor chips. Tech giants themselves confirm this focus; for instance, Google recently stated that its Capex "primarily reflects investments in servers and data centers to support AI."
Recent quarterly financial reports from Meta, Microsoft, Amazon, and Alphabet (Google's parent company) reveal the scale of current investments. Meta's year-to-date capital expenditure has reached $30.7 billion, double the $15.2 billion spent during the same period last year. For the most recent quarter alone, Meta’s Capex was $17 billion, also twice the amount from the equivalent quarter in 2024. Alphabet reported nearly $40 billion in Capex for the first two quarters of the current fiscal year, while Amazon’s stood at $55.7 billion. Microsoft indicated it would allocate over $30 billion in the current quarter to expand the data centers crucial for its AI services, an outlay projected to be at least 50% higher than the previous year and exceeding its record quarterly Capex of $24.2 billion. Microsoft CFO Amy Hood affirmed the company's commitment, stating, "We will continue to invest against the expansive opportunity ahead."
Looking ahead, the planned capital expenditures by these tech giants are set to balloon even further. Microsoft intends to invest approximately $100 billion in AI in the next fiscal year. Meta projects spending between $66 billion and $72 billion, and Alphabet plans for $85 billion, an increase from its earlier estimate of $75 billion. Amazon anticipates its 2025 expenditure to reach $100 billion, largely directed towards Amazon Web Services, with analysts now expecting this figure to climb to $118 billion. Collectively, these four companies alone are projected to spend over $400 billion on Capex in the coming year, according to the Wall Street Journal.
These multibillion-dollar investments are colossal, reportedly exceeding the European Union’s quarterly defense spending. Yet, the market's reaction suggests investors are eager for even greater outlays. Microsoft, Google, and Meta all revised their Capex forecasts upwards last quarter, a move that was met with enthusiasm by Wall Street analysts. Shares in each company surged following their respective earnings calls, with Microsoft’s market capitalization hitting $4 trillion the day after its report.
Even Apple, traditionally more reserved about its specific AI investments, has signaled a significant increase in its AI spending for the coming year, through either internal development or acquisitions. The iPhone maker's quarterly Capex rose to $3.46 billion, up from $2.15 billion in the same period last year. Despite reporting strong earnings driven by rebounding iPhone sales and robust performance in China, Apple is widely perceived as trailing its tech peers in the development and deployment of new AI products. Apple CEO Tim Cook confirmed the company is reallocating a "fair number" of employees to focus on AI and that the "heart of our AI strategy" involves increasing investments to embed AI across all its devices and platforms. While refraining from disclosing specific figures, Cook stated, "We are significantly growing our investment."
Beyond the established giants, smaller players are also striving to capitalize on this AI investment boom. OpenAI, for instance, recently announced it had secured $8.3 billion in investment, part of a larger $40 billion funding round that values the startup, known for its ChatGPT chatbot, at $300 billion. This indicates a widespread scramble for resources and market position across the entire AI ecosystem.