Big Tech plans $720 billion in AI spending this year, with no payoff yet

Amazon, Microsoft, Alphabet and Meta told investors they plan to spend at least $720 billion this year, mostly on AI data centers. None of them has shown that AI pays for itself yet. Wall Street noticed, and tech stocks dropped sharply last week.

What changed

The spending is called CapEx, short for capital expenditures. It means money put into buildings and equipment. Most of this year's total goes to AI infrastructure. On top of that, at least $1 trillion in spending commitments has been arranged for the coming years.

Tech stocks began to recover as investors turned to Tuesday's midterm elections, and they rose again on Tuesday. Revenue is growing at these companies. Amazon reported its fastest growth in five years, and Google Cloud's revenue more than doubled in a year. The worry is that growth may not justify the spending.

Google's awkward problem

Google's Search ad revenue grew 12% in the third quarter, down from 17% a year earlier. Executive Philipp Schindler said growth in AI Mode, Google's AI-powered search, hurt because those queries make less money. Google says its ad tests look promising but gave no examples.

Investors reacted harshly. Alphabet stock fell 13% on Thursday, its worst one-day drop ever. It has started to recover this week.

More spending is coming

• Alphabet plans $195 billion to $205 billion this year and "significantly" more in 2027.
• Amazon plans $220 billion this year and "meaningfully more" in 2027.
• Meta expects $135 billion to $145 billion this year and has not given a 2027 figure.

Amazon CEO Andy Jassy called the buildout a "once in a lifetime opportunity." Meta CEO Mark Zuckerberg said its Muse AI program will only turn a profit if the company cuts its computing costs. He expects efficiency to improve tenfold next year, which he says will take significant investment.

Not just the giants

Anthropic, the AI startup, updated its filing for a planned stock offering. Its third-quarter revenue reached $17 billion, up more than 1,000% from last year. Its computing costs were $17.5 billion. It has also committed nearly $900 billion to future computing and infrastructure costs.

What happens next

One outside force could change the plans. Voters elected candidates who favor pauses and other limits on data centers. Investors seemed to welcome that uncertainty, since tech stocks rose Tuesday. When the AI payoff will arrive is still unknown. If spending stalls or the excitement fades, tech stocks in retirement accounts and the AI tools businesses rely on could feel it.