Big Tech’s AI spending keeps rising as returns remain uncertain

The plans rattled Wall Street, helping drive a sharp selloff in technology stocks last week. Shares began recovering as investors turned to Tuesday’s midterm elections, where voters elected candidates who favor data-center moratoriums and other restrictions. The prospect of regulation may have added uncertainty to companies’ spending plans, but the earnings calls offered little indication that executives intend to pull back.

Revenue is growing at several companies: Amazon reported its fastest growth in five years for the quarter, Meta’s advertising revenue is surging, and Google Cloud’s revenue more than doubled in a year. Yet those gains have not settled investors’ concerns about the scale and timing of returns from AI spending. More than three years into the boom, Wall Street is asking when the investment will generate a payoff.

Alphabet provided a striking example. Philipp Schindler, the company’s senior vice president and chief business officer, said growth in AI Mode queries was affecting revenue because those queries were less effectively monetized. Search advertising revenue grew 12% in the third quarter, down from 17% in the same quarter a year earlier. Schindler said Google’s ad experiments had shown “promising results,” but gave no specific examples. Alphabet shares fell 13% on Thursday, their largest one-day drop in history.

The spending outlook remains expansive. Alphabet plans $195 billion to $205 billion in capital expenditures this year and expects a “significant” increase in 2027, CFO Anat Ashkenazi said. Amazon plans $220 billion this year, with CEO Andy Jassy saying 2027 spending will be “meaningfully more.” Meta expects to spend $135 billion to $145 billion this year. CEO Mark Zuckerberg said its Muse agentic AI program will become profitable only if compute costs fall; Meta expects compute efficiency to rise “tenfold” next year, requiring “significant investment.”

The pressure extends beyond the largest technology companies. Anthropic reported quarterly revenue of $17 billion, up more than 1,000% from a year earlier, but compute costs reached $17.5 billion. It has committed nearly $900 billion to future compute and infrastructure costs and plans to build its own data centers. Google is among the suppliers set to receive some of that money through sales of its TPU chips, though executives did not say whether those sales would offset Google’s own spending.

Microsoft was the exception in last week’s market reaction, reporting quarterly capital expenditures of $45.2 billion, below the expected $50 billion because of “third party capacity delays,” not a change in spending policy. The company also moved into the debt market: after CFO Amy Hood said Wednesday that Microsoft had not yet tapped debt markets to fund its AI buildout, news broke the next morning of a $25 billion, 10-part bond sale. No midterm-election questions came up on the companies’ earnings calls.