Large cap capex keeps climbing

Big tech is acting like they’re in a game show where the jackpot just keeps growing. But instead of racing to make money, they’re racing to spend it.

Alphabet, Microsoft, Meta Platforms, and Amazon all upped their capital expenditures forecasts in their earnings reports this week, and promised to splash out even more next year. The four companies are now projected to collectively spend over $380 billion in capex this year alone, according to CNBC.

Then there’s Apple, which is a bit of a black sheep when it comes to the AI race—only investing a measly $12.7 billion in AI infrastructure in fiscal 2025, far smaller than the rest of the Mag 7’s bills. But investors were in a forgiving mood after the company reported upbeat guidance for iPhone sales during its earnings announcement last night.

Zoom out: The high that all of these massive tech companies are chasing is a kind of superintelligent AI that completely transforms society. But right now, it’s unclear if what we’re getting is a groundbreaking technology akin to the Industrial Revolution, or a discount dot-com bubble that’s about to explode in all of our faces.

“We believe it to be a massive opportunity with the potential for strong returns on invested capital over the long term,” Amazon CFO Brian Olsavsky reassured investors on the tech giant’s earnings call.

But the members of the Magnificent Seven aren’t even the biggest AI spenders on the block. Privately owned rival OpenAI recently announced about $1 trillion worth of deals with partners like Nvidia, Broadcom, and Oracle as Sam Altman looks to maintain his dwindling lead in the AI race.

Investors’ mixed emotions

While Meta dipped about 11% yesterday after the social media giant upped its AI spending guidance to roughly $71 billion for the year, Amazon soared 9.58% today after the company said it was planning to spend $125 billion this year—and potentially more next year.

There’s a reason traders cheered when Amazon revealed its AI receipt, while being spooked by Meta for doing the same thing: Amazon is actually already enjoying results from AI in its software cloud business, where sales growth jumped 20% last quarter.

Meanwhile, although Meta CEO Mark Zuckerberg has promised AI will boost how his company sells ads and recommends content on Instagram and Facebook, its earnings report lacked the cold, hard proof.

Meta may have lost this round, but the AI race is far from over—and these companies will spend whatever it takes to win.—LB