Key facts
- Big Tech companies are significantly increasing capital expenditure for AI infrastructure.
- Total capex for Google, Meta, Amazon, and Microsoft is projected to reach $750bn this year.
- Quarterly capex budgets have quadrupled since 2023, outpacing share price growth.
- Escalating AI costs are leading to reduced share buybacks.
- Annual depreciation for these firms has nearly doubled to $116bn over two years.
- Amazon has shortened the useful life of its data centre assets from six to five years.
The intense competition in the artificial intelligence sector is driving unprecedented capital expenditure among Big Tech firms, with Google, Meta, Amazon, and Microsoft collectively expected to spend $750 billion this year on AI infrastructure. This surge in spending, which has quadrupled quarterly budgets since 2023, is outpacing share price growth and straining company finances. Physical constraints such as chip supply, power, and water infrastructure, coupled with the high cost of AI projects that are far from profitability, are limiting further expansion. Consequently, these companies are diverting capital away from share buybacks, a strategy that has historically supported their stock valuations. Furthermore, the rapid pace of AI innovation is accelerating depreciation costs, as evidenced by Amazon's decision to shorten the useful life of its data centre assets. This shift suggests that Big Tech may face challenges in maintaining previous levels of shareholder returns as AI investments continue to escalate.