Big Tech's $400 Billion AI Spending Spree Just Got Wall Street's Blessing

The AI arms race is accelerating as the major tech companies add to their already gargantuan levels of spending.

- Rolfe Winkler, Nate Rattner & Sebastian Herrera

The bets are paying off for investors, but not for all employees.

Alphabet's Google, Microsoft, Amazon, and Meta Platforms are set to spend nearly $400 billion this year on capital expenditures, largely to build their artificial intelligence infrastructure. That is more than the European Union spent on defense last year.

Those firms and others plan to boost outlays even more. Morgan Stanley projects $2.9 trillion in spending from 2025 to 2028 on chips, servers, and data-center infrastructure. The investments, the bank says, will contribute as much as 0.5% of U.S. gross domestic product growth this year and next.

The investments are helping power big increases in the companies' profits, pushing some of their share prices to records.

Wall Street often looks down on excessive corporate spending. But not here. Microsoft and Meta shares soared Thursday after they reported earnings—and their sizable capital spending—reaching market capitalizations of $4 trillion and nearly $2 trillion, respectively.

Also booming is Nvidia, which designs the chips that tech companies primarily use to build their AI models. It was the first company to surpass $4 trillion in market capitalization. Its shares are up more than 28% this year.