Big Tech Companies Reveal New AI CapEx Strategy

The latest earnings reports from Amazon, Google, Microsoft, and Meta have dispelled concerns about the return on investment (ROIC) of artificial intelligence (AI) CapEx. For over a year, investors have been worried that big tech companies are overspending on AI investments with little to show for it. However, this quarter's earnings season has revealed a new strategy from these companies: investing in long-lived assets such as land and data center shells, while ordering short-lived assets like chips only when demand is certain.

Amazon raised its 2026 CapEx guide to $220 billion, while Google increased its full-year guide to $195-205 billion. Meta also lifted the floor of its guide to $130-145 billion. All four companies have adopted a two-part investment strategy: committing early to long-lived assets and ordering chips only when demand is visible.

This new approach has been made possible by advancements in technology, which allow for more flexibility in AI investments. Microsoft's Copilot finally gained momentum this quarter, with net adds more than doubling from the previous quarter. Meta is also building four new revenue lines on top of ads: transactional, compute, APIs, and subscriptions.