Despite growing market concerns about an "AI (Artificial Intelligence) bubble," several U.S. tech giants are resolutely increasing their capital expenditures.
This week, Google, Meta, Microsoft, Amazon, and Apple—five of the U.S. stock market's "Magnificent Seven" tech giants—successively released their earnings reports for the last quarter. Among them, the three major cloud giants (Google, Microsoft, and Amazon) as well as Meta clearly stated that they will increase capital expenditures, predicting this trend will continue into next year.
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Among the four giants, Microsoft's capital expenditure in the first quarter of fiscal year 2026 (the three months starting July 1 this year) reached a staggering $34.9 billion. Meta raised the minimum level of its full-year capital expenditure forecast by $4 billion, with the full-year projection now ranging between $70 billion and $72 billion. Google also raised its forecast for the second time this year, expecting full-year capital expenditure to be between $91 billion and $93 billion. Amazon, meanwhile, projects that its total expenditure in 2025 will hit $125 billion.
Additionally, Microsoft noted that the growth rate of capital expenditure in fiscal year 2026 is expected to outpace that of fiscal year 2025. Meta, Google, and Amazon each emphasized that their capital expenditures will continue to grow next year. Anat Ashkenazi, CFO of Google's parent company Alphabet, even stated that the company's capital expenditure in 2026 "will increase significantly."
Satya Nadella, Chairman and CEO of Microsoft, said that due to strong demand for the company's cloud services, Microsoft will boost its overall AI computing power by more than 80% this year and plans to double the total size of its data centers over the next two years. Andy Jassy, CEO of Amazon, also mentioned that since 2022, Amazon's data center capacity has already doubled and is expected to double again by the end of 2027.
## Meta's Aggressive Spending Raises Concerns; Microsoft Revises Earlier Forecast
While tech giants are ramping up AI investments, market reactions are mixed.
After releasing its earnings report, Meta's (Nasdaq: META) stock price plummeted 11% the next day, marking its largest single-day drop since October 2022. It closed at $666.47 per share with a total market value of $1.67 trillion, erasing $220 billion in market value in one day.
Regarding the company's aggressive spending on AI, Mark Zuckerberg explained during the earnings call that the growing computing power needs of Meta's AI projects have increased the company's expenditures on data centers and cloud services: "This means that significant investments in this area are likely to yield substantial profits over time."
Zuckerberg also defended the company: "We are still in the early stages of investment, but I believe we have already seen returns from AI in our core businesses. This gives us more confidence to increase investment and ensure we are investing sufficiently."
However, analysts point out that unlike Microsoft, Google, and Amazon, Meta is not a cloud service provider directly serving external customers, making it more risky for its high capital expenditures to generate adequate returns.
Angelo Zino, an analyst at research firm CFRA Research, said Meta cannot reap immediate benefits from its AI investments: "Meta's spending level exceeds what Wall Street hoped to see, so Wall Street is currently dissatisfied with them."
For the three major cloud giants, their cloud businesses accelerated growth in the third quarter. Amazon AWS's revenue in this quarter was $33.006 billion, a year-on-year increase of 20%—its fastest growth rate since 2022. Microsoft Azure's revenue rose 40% year-on-year (no specific figure was disclosed), and the total value of remaining performance obligations (RPO) for cloud contracts reached $392 billion. Google Cloud's revenue increased 34% to $15.157 billion, with a backlog of $155 billion.
Nevertheless, Microsoft's (Nasdaq: MSFT) stock price also declined after the earnings release, falling 2.90% to close at $525.82 per share with a total market value of $3.91 trillion.
During the earnings call in July this year, Amy Hood, Microsoft's CFO, had stated that the growth rate of capital expenditure in fiscal year 2026 is expected to be lower than that in fiscal year 2025. However, three months later, facing unresolved supply and demand issues, Microsoft revised its forecast.
When asked by an analyst if the company is worried about an AI bubble, Hood responded that even though Microsoft has invested tens of billions of dollars in recent quarters, it still cannot meet customer demand for AI and other services: "I thought we could catch up, but we haven't. Demand is growing, and not just in one area, but across multiple areas simultaneously."
## Google Presents Clear AI Profit Path; Amazon Demonstrates Cloud Business Strength
On the other hand, Google and Amazon's earnings reports were well-received by the market as they showed the potential for AI to drive revenue growth while increasing investments.
The day after releasing its earnings report, Google's (Nasdaq: GOOGL) stock price rose 2.45% to close at $281.90 per share, with a total market value of $3.41 trillion.
In addition to its cloud business, Google emphasized that AI advancements have helped improve its search business. As of the end of the third quarter, "AI Mode"—an AI-powered feature embedded in Google's search engine—had 75 million daily active users in the United States, and search queries under this mode doubled in the third quarter. Meanwhile, the company began testing advertising features in AI Mode.
Thomas Monteiro, a senior analyst at financial website Investing.com, noted that Google Cloud's third-quarter revenue exceeded the market's highest expectations: "In the current competitive environment, it's impressive that Google has achieved this without compromising profit margins. What's more interesting is that the company's capital expenditure has not pressured profit margins as many expected, making its prospects still optimistic."
Zino also pointed out that Alphabet, Google's parent company, "provides the clearest AI profit path in many ways."
For Amazon, the accelerated growth of its cloud business has reassured investors who were worried about losing market share to competitors. After the earnings release, Amazon's (Nasdaq: AMZN) stock price soared more than 13% in after-hours trading on October 30.
Jassy said during the call that due to Amazon's limited capacity, customers are rapidly snapping up its cloud computing and AI services: "Currently, for the entire industry, the bottleneck may be electricity. I think at some point in the future, the bottleneck may shift to chips. However, we are significantly expanding capacity, and while doing so, we can convert it into revenue."
Melissa Otto, an analyst at S&P Global, stated that the strong performance of Amazon's cloud business and core retail business has reassured investors who were worried that the company would spend too much on the so-called "AI bubble": "We have seen sufficient signs that AWS is performing extremely well. In my opinion, Amazon is not chasing a bubble but a company operating at full capacity."
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