Meta (META), Microsoft (MSFT), and Google parent Alphabet (GOOG) are expecting a cumulative $228 billion in capital expenditures in 2025, driven by their investments in artificial intelligence infrastructure. That’s a 55% increase from the roughly $150 billion those companies reported spending in 2024.
Tech giants contend all this spending will pay off in the long run. Investors aren't so sure. Uncertainty surrounding the timeline for the payoff — along with ongoing debates about whether such high levels of spending are truly justified — continues to fuel concerns with each earnings cycle.
The companies’ higher-than-expected capital expenditures for the upcoming year come just as investors are scrutinizing Big Tech’s hefty artificial intelligence spending.
Case in point: DeepSeek. The Chinese startup rattled markets last week as it debuted open-source AI models competitive with OpenAI’s for a fraction of the price. Tech stocks sold off across the board as the model cast doubt on the rationale behind tech giants’ mammoth spending on artificial intelligence infrastructure.
The DeepSeek surprise didn't seem to impact tech companies' big spending plans.
Meta confirmed last week that it will spend $60 billion to $65 billion in 2025, a massive bump from its prior guidance to investors of $38 billion to $40 billion for the year. CEO Mark Zuckerberg said the company will ultimately spend “hundreds of billions of dollars” to “invest in AI infrastructure over the long term.” That includes investments in building massive data centers, such as the construction of a new facility in Louisiana nearly the size of, well, Manhattan.
Google reported Tuesday that it expects to spend $75 billion this year, about 30% higher than Wall Street expected, per LSEG data. Shares of Alphabet dropped 7% Wednesday following the announcement.
Investors have been wary of Microsoft's spending as its AI services struggle to gain momentum.
The company’s nearly $56 billion in spending during its fiscal year 2024 (for the year ended June 31), fueled by AI — coupled with lower-than-expected revenue linked to artificial intelligence — sent shares tumbling following the results last summer. Microsoft recently announced its fiscal second quarter results, which showed the tech heavyweight has already spent $42 billion of its expected $80 billion in capital expenditures so far in 2025.
Why are investors skittish? Because the revenue generated directly from the companies’ AI features remains unclear.
When asked about how Meta is monetizing AI, the company’s response was more or less "spend now, worry later." Meta CFO Susan Li said in a post-earnings call on Jan. 29, “Our initial focus for Meta AI is really about building a great consumer experience, and that's frankly where all of our energies are kind of directed to right now.”
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“There will, I think, be pretty clear monetization opportunities here over time, including paid recommendations and including a premium offering, but that's really not where we are focused in terms of the development of Meta AI today,” she added.
Meta shares rose after its earnings report despite that lack of clarity as the company pointed to the rapid uptake of its AI tools for advertisers, which increased to 4 million from 1 million six months ago. Li said, “Meta AI usage continues to scale with more than 700 million monthly actives.”
JPMorgan’s Doug Anmuth said “the return on AI investments is more apparent in Meta’s core advertising business” than Google’s.
Google CFO Anat Ashkenazi said the company's Cloud segment “is generating billions in annual revenue from AI infrastructure and generative AI solutions,” but did not give specifics. Ashkenazi added that demand for its Cloud AI products outpaced capacity. Google declined to respond to chof360 Finance’s questions about its AI revenue.
Meanwhile, Microsoft said in its most recent quarterly earnings report that its total AI business, which includes Azure AI services as well as other Copilot and generative AI offerings, surpassed an annual revenue run rate of $13 billion in the period ended Dec. 31. Microsoft said that AI contributed 13 percentage points to its growth in Azure revenue, which increased 31% from the prior year. Microsoft AI revenue are partially driven by commitments from OpenAI. OpenAI’s own path to monetization is fuzzy, as the AI startup estimated that it lost $5 billion in 2024 while only generating $3.7 billion in revenue.
Fellow tech behemoth Amazon (AMZN) is set to report fourth quarter earnings after the bell Thursday. The company previously said it expected to spend $75 billion in 2024.
Despite investor scrutiny of AI spending, Wall Street analysts remained positive on Big Tech stocks. Raymond James analysts in a Feb. 3 report wrote that while “monetization questions linger,” there is “evidence building towards [companies] closing the gap.” Morgan Stanley analysts said the growing expenditures from tech firms are “bolstering the bull case for AI/cloud capex stocks.”
Laura Bratton is a reporter for chof360 Finance. Follow her on Bluesky @laurabratton.bsky.social. Email her at laura.bratton@yahooinc.com.
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