US tech giants are betting heavily on the future of artificial intelligence (AI) driven by massive data centers. However, the staggering investment spending is making Wall Street uneasy.
The three giants, Alphabet, Meta Platforms, and Microsoft, spent a combined $78 billion in capital expenditures last quarter, a year-on-year increase of 89%. Most of this funding went towards building data centers and purchasing graphics processing units (GPUs) and related hardware. All three companies have raised their future spending forecasts.
Meta CEO Mark Zuckerberg stated that he is not worried about overspending on AI infrastructure: “We should invest more.”
After Meta and Microsoft announced huge spending figures in their earnings reports, their stock prices both fell in after-hours trading. Meta also warned that spending in 2026 will be “significantly higher” than in 2025.
In contrast, investors have been relatively calm in accepting Alphabet's plans to increase investment. The company's stock price rose more than 6% in after-hours trading. The earnings reports of these three companies have prompted Wall Street to reconsider: Is an AI bubble brewing?
Bernstein analyst Mark Moerdler asked during Microsoft's earnings call, "Are you confident that these AI investments will ultimately pay off, or, frankly, are we in a bubble?"
Microsoft CFO Amy Hood responded that even after investing tens of billions of dollars in the past few quarters, the company is still unable to meet current demand for AI and other services. "I thought we could keep up with the demand growth," she said, "but we haven't. Demand is still rising, and it's not concentrated in one area, but across multiple areas."
Microsoft's previous $13 billion investment in OpenAI ignited a global AI boom. Now, whether the software giant can maintain its leading position in AI may depend on the speed of its data center expansion. Nevertheless, Microsoft's record $34.9 billion in capital expenditures in the third quarter still surprised investors.
As Microsoft's main platform for recouping its investment costs, Azure cloud computing revenue maintained strong growth, but the growth rate was flat compared to the previous quarter. If growth can accelerate further, investor confidence in its massive spending will be even stronger.
Alphabet's Google, however, offered a more optimistic outlook. The company stated that its Gemini AI assistant now boasts 650 million monthly active users, a 44% increase from three months ago. Alphabet CFO Anat Ashkenazi revealed in an analyst conference call that Google Cloud Platform signed billion-dollar contracts in the first nine months of this year, exceeding the total number signed in the previous two years.
Google Cloud revenue grew 34% to $15.2 billion, exceeding the expected $14.8 billion. However, Google's spending is also rising rapidly. Ashkenazi stated that the company expects capital expenditures to reach $93 billion this year, higher than the previous estimate of $85 billion, and anticipates a "significant increase" next year.
