FOMO drives tech titans to invest over $344b in data centres, AI innovations

WEB DESK: The key takeaway from the recent spending strategies of the world’s biggest tech firms is to never underestimate the power of the fear of missing out.

Microsoft Corp., which set a $24.2 billion capital spending record last quarter, plans to drop upward of $30 billion in the current period. Amazon.com Inc. similarly spent $31.4 billion last quarter, almost double of what it dropped a year ago, and is maintaining that level of investment. Google owner Alphabet Inc. raised its capital expenditures guidance this year to $85 billion.

Then there’s Meta Platforms Inc. The social networking giant lifted the low end of its forecast for 2025 capital expenditures and projected that costs will continue to grow at an even faster pace next year. Altogether, the four companies are expected to spend more than $344 billion for the year, with much of it going to the data centres necessary to run AI models.

The emphasis from virtually every company executive during this earnings season was on investing as quickly as possible to get ahead. “We need the teams to execute at their very best to get the capacity in place as quickly and effectively as they can,” Microsoft Chief Financial Officer Amy Hood told analysts in a call on Wednesday. Susan Li, Meta’s CFO, said the goal of its own spend is to secure the advantage ‘in developing the best of AI models.”

Big tech on a quest for ideal AI device

Meta was rewarded – in large part because the company posted a strong second-quarter sales beat and issued a rosy revenue forecast, signalling that the billions its spending on AI are paying off. “On advertising, the strong performance this quarter is largely thanks to AI unlocking greater efficiency and gains across our ad system,” CEO Mark Zuckerberg said, according to Bloomberg.

Zuckerberg has plans to build several massive data centres and has been luring top AI researchers with compensation packages valued at hundreds of millions of dollars. The company recently restructured its internal AI division, now referred to as Meta Superintelligence Labs, in an effort to build human-level AI capabilities and apply that technology across its products.

Shares of the company have gained more than 8 percent since it reported earnings on Wednesday.

Amazon on the other hand, failed to convince investors that its lavish spending has been worth it. The stock was down as much as 8.1 percent on Friday after the company reported tepid sales from tis cloud division. The results were “especially disappointing” given the strong performance from Google’s and Microsoft’s own cloud services.

And the ongoing capital costs won’t help. the operating margin for Amazon’s cloud unit will  continue to face pressure “through 2026 as capital spending ramps up.

Alphabet’s shares are essentially unchanged from last week when it reported earnings and issued guidance. The company raised its capital expenditures outlook by $10 billion and expects to ramp up spending even more in 2026. CEO Sundar PIchai explained that the investments are necessary to keep up with customer demand.

“Obviouslyl we are seeing strong momentum across our portfolio, and especially in cloud,” Pichai told analysts. “It’s a tight supply environment and we are investing more to expand.”

Microsoft ties its AI investments directly to a 39 percent jump in sales for its Azure cloud-computing division, which came in ahead of analysts’ estimates. “We continue to lead the AI infrastructure wave and took share every quarter this year,” CEO Satya Nadella said.

“In Microsoft’s case, the returns are good,” said an analyst. The only question now is whether Microsoft’s customers are in turn seeing a decent return on investment. “That’s where the tests will be. If they don’t they’re not going to increase that spend next year.”

Apple Inc.’s capital plans pale in comparison to its big tech peers. But the iPhone maker did raise its spending estimates, tying much of the increase to AI efforts. Apple’s property, plant and equipment investments totalled $9.47 billion in the nine months ended June 28, up nearly 45 percent from a year ago.