Tech giants are setting records every few months for how much they are spending on artificial intelligence — but this time, some jitters are also growing.
On Thursday, Amazon said its capital expenditures totaled $53 billion in the second quarter, up 69 percent from a year earlier, as it built A.I. data centers and other infrastructure. It joined a parade of other big tech companies, with Meta on Wednesday reporting that its costs had risen 55 percent from last year, while Microsoft said its capital expenditures had soared 69 percent. Last week, Google also disclosed that its costs had jumped and said it would boost its spending further.
These numbers are only set to skyrocket. Across this year and next, Amazon, Google, Meta and Microsoft are expected to spend a staggering $1.5 trillion building data centers and stuffing them with advanced chips, according to Wall Street estimates compiled by FactSet.
“The scale of it is nuts,” said Melissa Otto, who leads research at S&P Global’s Visible Alpha division.
Alarms are rising as Wall Street and others question when this spending can be justified. On Thursday, Amazon’s share price rose almost 10 percent in after-hours trading after its cloud computing division experienced its fastest growth since early 2022, and shares of Microsoft, which did not change its spending forecast, jumped more than 15 percent.
But Meta’s stock sank more than 7 percent on Thursday after it revealed its A.I. outlays and that costs were growing faster than its revenue. And last week, for the first time since going public in 2004, Google said it had “negative free cash flow,” which meant it was spending more on day-to-day operations and building new infrastructure than it was taking in from its businesses. Google’s stock fell more than 6 percent the next day.
Even so, the companies insist they are doing the right thing. “As long as we see these attractive opportunities to invest, we will continue to invest,” Anat Ashkenazi, Alphabet’s finance chief, told Wall Street analysts last week.
More than a dozen years ago, tech companies became the largest enterprises on the planet, fueled by their software and digital businesses. But A.I. has flipped tech’s “asset-light” model on its head. Multibillion-dollar data centers, which the industry likes to call “A.I. factories,” have become critical investments for developing advanced systems and making them available to customers.
From April through June, capital expenditures by the four companies totaled $170 billion, up 72 percent from a year earlier. The figures are ballooning — and projections keep rising every three months — as the companies race to open more data centers, and as the prices for necessary components like memory chips jump because of the demand. In April, Microsoft said soaring component prices would add $25 billion to its tab this year.
Despite all the building and spending, the tech giants say they do not have enough computing power to meet demand. In effect, they say, they have been leaving money on the table.
“More capacity = more sales,” a Bank of America analyst, Justin Post, wrote last week in a research note after Alphabet, Google’s parent company, increased its spending forecast for this year by $15 billion to as much as $205 billion.
The pent-up demand has contributed to a backlog in signed contracts for Amazon, Google and Microsoft. Combined, that backlog reached almost $1.7 trillion, more than doubling from a year earlier.
Much of the growing backlog comes from partnerships with OpenAI and Anthropic, the leading A.I. start-ups. That means the fate of the giants rests in large part on the start-ups’ needing all the computing power they have requested, and their ability to pay for it. That poses a concentration risk, creating “a more circular system that could mask true demand,” according to Moody’s Ratings.
(The New York Times has sued OpenAI and Microsoft, claiming copyright infringement of news content related to A.I. systems. The companies have denied the claims.)
The tech companies have borrowed more than ever to fund the A.I. building boom. Yet they are also able to rely on their lucrative established businesses, like digital advertising, which rain down cash.
“This party could go on for a while,” Ms. Otto said.
Amazon said on Thursday that it had $200.6 billion in sales in the second quarter, up 20 percent from a year earlier. Profit more than tripled to $62.6 billion, in large part because of the company’s investment in Anthropic.
Amazon’s core retail business in North America grew 16 percent. Its cloud computing business grew 37 percent to $42.2 billion in sales. The cloud business’s operating profits grew, too, which some analysts said amounted to proof that Amazon was making good use of its spending.
Cash from operating its business over the past year was $161.4 billion, up 33 percent. But after investments in data centers and other facilities, Amazon’s free cash flow plunged to negative $7.6 billion.
In a call with investors, Andy Jassy, Amazon’s chief executive, said the company now expected about $220 billion on capital expenditures this year, up $20 billion from its previous forecast, primarily because of the rising costs of memory chips. But after the heavy initial investments in building data centers, the facilities have more than 30 years of life to produce sales and profitable business, he said.
He said Amazon’s cloud services could “very possibly be a trillion-dollar annual revenue business for us in time.”
Investors pummeled Meta on Thursday after the company forecast disappointing sales a day earlier, while it raised the lower end of its capital expenditure forecast for the year to $130 billion, from the $125 billion it projected in April.
“I mean, look, the high-level observation is that there’s just nowhere near enough compute for all the demand,” Mark Zuckerberg, Meta’s chief executive, told investors as he made a case for why the investments will pan out.
Susan Li, Meta’s finance chief, said the company was focused on securing as much capacity as possible for 2026 and 2027, but keeping flexibility in mind for 2028 and beyond. That means locking up land and power for data centers now, even if the company has not figured out precisely how it will use the computing down the line.
Microsoft’s share price, which has been down this year, got some reprieve on Thursday as the company’s financial results, released a day earlier, surpassed Wall Street expectations and the company did not increase how much it planned to spend this year.
Sales of Azure, the cloud computing platform at the heart of Microsoft’s A.I. services, exceeded $100 billion for the first time for the fiscal year that ended in June, and quarterly sales grew at the fastest pace since 2022, when Azure was a much smaller business. Microsoft expects to spend more than $50 billion in the current quarter.
Satya Nadella, Microsoft’s chief executive, said the company had opened 31 data centers across five continents last quarter. The company, he said, is “on track to roughly double our overall capacity in just two years.”
