OpenAI spending spree Wall Street focus on capex in Big Tech earnings

OpenAI’s head-spinning investments announced in recent months have led to increased scrutiny of the hyperscalers, which are all racing to develop infrastructure for the accelerating artificial intelligence boom.

Investors are about to get a lot of new information to digest.

Microsoft, Alphabet, Meta and Amazon announce quarterly results this week. While they all have very different businesses – and compete in certain areas – Wall Street is going to be laser focused on one particular line item: capital expenditures.

“You’re just seeing this massive commitment on the part of companies to really invest,” said Melissa Otto, head of Visible Alpha Research at S&P Global. “It’s going to be interesting to hear what they have to say about their investment trajectory, if they see this slowing down.”

For almost three years, the market has been swept up in an AI frenzy, as generative AI chatbots like OpenAI’s ChatGPT and Google’s Gemini have shown their power to potentially reshape vast swaths of the economy.

The biggest chokepoint today is a lack of sufficient compute capacity, and not nearly enough power.

AI companies are disclosing plans to build out massive supercomputing data centers, typically based around Nvidia AI chips, to handle the expected load. OpenAI, a privately held company valued at $500 billion, has set itself apart, announcing roughly $1 trillion worth of future infrastructure developments with partners including Nvidia, Oracle and Broadcom.

Aside from OpenAI, the biggest builders include the four internet hyperscalers that are set to post earnings this week. In each case, investors want to see aggressive plans and a clear strategy. But unlike OpenAI, they can’t go too big out of concern that public investors will hammer their stocks.

Morgan Stanley analysts said in a note last week that they expect total hyperscaler capital expenditures to grow 24% next year to nearly $550 billion.

The companies also have to show revenue growth, especially Amazon, Microsoft and Google, which are competing for AI business in their cloud units.

“There are trillions of dollars that are being earmarked to be spent relative to hundreds of billions of dollars of free cash flow generated by the Mag 7,” Impactive Capital co-founder Lauren Taylor Wolfe told CNBC’s “Squawk on the Street” last week, suggesting that companies have yet to see significant returns on investment.

Analysts will be also be looking to see how Microsoft’s Copilot AI features are driving growth in its other businesses. And whether Google’s AI investments are helping it defend its core search and ads business as more consumers turn to ChatGPT for information. Meta has said that its generative AI technology has bolstered the company’s ability to target ads.

The other megacap company reporting this week is Apple. The iPhone maker has thus far been in a separate category in AI because it doesn’t operate a public cloud service or build major large language models that it shares with the public.

However, Apple CEO Tim Cook said in June that the company would be increasing its capital expenditures for AI, so it’s likely to be a bigger topic in Thursday’s earnings report.

Here’s what the hyperscalers have said so far, and what Wall Street is expecting:

Microsoft said in July that it expected to spend $30 billion in capital expenditures during the quarter, which would represent annual growth of over 50%.

But CFO Amy Hood told investors at the time that while capex would grow in fiscal 2026, which began in July, it would be slower growth than in fiscal 2025.

Analysts expect capex to increase 42% this fiscal year to $91.3 billion, following growth of 45% in the prior year, according to FactSet.

Hood said on the last earnings call that the company faces infrastructure shortages relative to AI demand.

“I talked about it, my gosh, in January, and said I thought we’d be in better supply-demand shape by June,” she said said. “And now I’m saying I hope I’m in better shape by December.”

Alphabet said in July that it expected capex of $85 billion this year, up from a previous target of $75 billion.

CFO Anat Ashkenazi told investors at the time that the company planned to raise that figure again in 2026, and that Alphabet monitors demand to make sure the money isn’t wasted.

“We have a highly rigorous process to determine the demand behind it, and then the allocation of the compute associated with our technical infrastructure investments, ensuring that we’re utilizing that appropriately,” Ashkenazi said.

She added that Google’s capital expenditures also support the company’s own products, like Gmail, Google Maps and YouTube, in addition to serving cloud customers and AI lab DeepMind.

Google is likely going to have to add capacity after Anthropic, a major AI lab, said it would reserve as many as 1 million of the company’s TPU AI chips next year, a deal worth tens of billions of dollars.

For 2025, analysts expect capex growth of 57% to $82.4 billion, following growth of 63% last year, according to FactSet. They see growth moderating to 12% next year to $92.6 billion.

Over the summer, Meta boosted the midpoint of its 2025 capex forecast by $1 billion to $69 billion.

Although Meta doesn’t have a cloud service it rents to customers, CEO Mark Zuckerberg has touted the importance of the company’s AI infrastructure as giving it an edge in ad delivery and in creating new kinds of feeds, like its AI-generated video app Vibes.

“We’re making all these investments because we have conviction that superintelligence is going to improve every aspect of what we do,” Zuckerberg said in July.

Zuckerberg has also developed a relationship with Nvidia CEO Jensen Huang, who said at an investor event in October that Facebook used Nvidia chips to create highly successful ad targeting algorithms.

In 2021, Meta’s ad business suffered after Apple implemented a new privacy system that made it harder to target users on mobile devices. Huang said that in figuring out a solution to the problem, Meta “fixed that with AI powered by Nvidia GPUs.”

Analysts surveyed by FactSet expect Meta to show capex expansion this year of 84% to $68.4 billion, accelerating from 37% growth in 2024. They expect 42% growth in 2026 to $97 billion.

Three months ago, Amazon CEO Andy Jassy tried to reassure investors that Amazon Web Services has maintained a “pretty significant” leadership position relative to its cloud rivals and said he feels optimistic about its AI offerings. But Microsoft Azure and Google’s cloud unit have been growing faster.

Amazon plans to spend over $100 billion on capital expenditures this year. It didn’t raise its target in July, but signaled capex of about $31 billion per quarter in the last two periods of the year.

“We will continue to invest more capital in chips, data centers, and power to pursue this unusually large opportunity that we have in generative AI,” CFO Brian Olsavsky told investors.

Olsavsky said much of Amazon’s spending was on the company’s custom AI chip, called Trainium, as well as other technology infrastructure. But he noted that Amazon’s expenditures also support the company’s fulfillment and transportation network that deliver packages to users.

Analysts are calling for 41% capex growth this year to $117 billion, slowing from 57% growth in 2024, according to FactSet. They see growth of about 8% next year to $126.6 billion.

Apple’s spending is a fraction of its rivals.

In fiscal 2024, the company only spent $9.4 billion on capex, or about 2% of overall revenue. That was a decline from the prior year.

For fiscal 2025, which ended in September, analysts expect growth of 28% to $12.1 billion, and they see expansion of 19% to $14.4 billion in 2026.

Apple executives say that because the company’s “hybrid” strategy is to rent much of the computing capacity it needs from cloud providers, those costs become operations expenses.

Cook has signaled that may be changing, though the company doesn’t offer an official guide for future capex.

“We are also significantly growing our investments,” Cook told investors this summer.

CFO Kevin Parekh said, “You are going to continue to see our capex grow,” adding that, “It’s not going to be exponential growth, but it is going to grow substantially.”

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