Meta, Microsoft test Street as AI-fuelled spending surges 89%

Alphabet’s Gemini hits 650 million users

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The largest technology companies are betting on an AI future powered by gigantic data centres filled with humming servers.

Now that the staggering cost of this push is coming into sharper focus, it’s testing nerves on Wall Street.

Three bellwethers from different corners of the technology world - Alphabet Inc., Meta Platforms Inc, and Microsoft Corp. — together racked up some $78 billion in capital expenditures last quarter. That’s up 89% from a year earlier.

Most of that cash was destined for data centre construction and graphics processing units and other gear to fill them. Each increased their forecasts for future outlays. That was enough to rattle investors conditioned to expect enormous spending.

Meta shares slid 8.3 per cent, and Microsoft was down 2.7 per cent in early trading on Thursday following the firms disclosures of their expenditures as part of quarterly reports.

Though Google investors largely took its capital increase in stride, sending the shares up more than 7 per cent in premarket trading, the trio of reports renewed questions over whether a bubble is forming.

On a conference call with Microsoft executives, Bernstein analyst Mark Moerdler asked if they were confident that the AI investments would pay off. “Or, frankly, are we in a bubble?”