Investors used to judge AI stocks by three factors: revenue, earnings, and whether those figures beat Wall Street\u2019s expectations.<\/p>\n
For the largest tech companies, that framework is rapidly becoming obsolete.<\/p>\n
Wall Street has become obsessed with a different line on the financial statements: capital expenditures, or capex.<\/p>\n
Investors now want to know something far more important:<\/p>\n
How many billions are they willing to spend to win the AI race?<\/p>\n
The Hidden Price of AI Spending<\/p>\n
Google\u2019s parent reported $44 billion in capital expenditures during the latest quarter, bringing spending over the past 12 months to $132 billion\u2014roughly double the level of a year earlier. <\/p>\n
Management also guided for about $200 billion in Capex over the next 12 months, signaling that the spending spree is far from over.<\/p>\n
The immediate consequence is the disappearance of the financial metric equity investors have historically prized most: free cash flow.<\/p>\n
As AI infrastructure spending ballooned, Alphabet\u2019s quarterly free cash flow turned negative for the first time in the company\u2019s history, underscoring the trade-off at the heart of the AI race. <\/p>\n
Hyperscaler are increasingly willing to sacrifice today\u2019s cash generation in exchange for tomorrow\u2019s computing capacity.<\/p>\n
But investors do not have that luxury to wait. <\/p>\n
Now the spotlight shifts to Microsoft and Meta, whose earnings this week could determine whether Wall Street believes the AI infrastructure boom is accelerating even further.<\/p>\n
The Hyperscaler\u2019s AI CAPEX Tracker<\/p>\n
The scale of spending is unprecedented across the group.<\/p>\n
Consensus estimates suggest that figure will surge to nearly $800 billion over the current fiscal year, exceed $1 trillion the next, and approach $1.33 trillion annually within five years.<\/p>\n
Among this week\u2019s earnings reports, Microsoft and Meta stand out.<\/p>\n
Microsoft spent approximately $97.2 billion over the last twelve months. <\/p>\n
Analysts now expect CapEx to climb to $118.9 billion over the next fiscal year, a 22% year-over-year increase, before accelerating to $178.9 billion the following year, another 50% jump.<\/p>\n
Meta\u2019s spending trajectory is even steeper.<\/p>\n
After investing about $75.8 billion over the past year, consensus expects capex to reach $135.2 billion over the next twelve months\u2014an eye-catching 79% increase\u2014before rising another 29% to $174.1 billion the following year.<\/p>\n
The numbers suggest that investors may spend less time analyzing advertising growth or Azure cloud revenue than examining one figure buried in the cash flow statement.<\/p>\n
The AI spending race is only beginning. <\/p>\n
Consensus estimates suggest annual capital expenditures by the world\u2019s largest hyperscalers could surpass $1 trillion as early as next year and approach $1.3 trillion within five years.<\/p>\n
AI Hyperscaler Spending: Current Levels And Five-Year Outlook<\/p>\n
Image: Shutterstock<\/p>\n","protected":false},"excerpt":{"rendered":"Investors used to judge AI stocks by three factors: revenue, earnings, and whether those figures beat Wall Street\u2019s…\n","protected":false},"author":2,"featured_media":120337,"comment_status":"","ping_status":"","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[11],"tags":[420,7829,8374,8789,5896,5892,320,7828,5891,7706,7778,9068,5899,26530,28294,60976,47538,60975],"class_list":["post-120336","post","type-post","status-publish","format-standard","has-post-thumbnail","category-microsoft","tag-azure","tag-azure-ai","tag-category-equities","tag-category-large-cap","tag-category-tech","tag-cms-wordpress","tag-microsoft","tag-microsoft-ai","tag-pageisbzpro-bz","tag-symbol-amzn","tag-symbol-googl","tag-symbol-meta","tag-symbol-msft","tag-symbol-orcl","tag-symbol-spcx","tag-tag-ai-spending","tag-tag-big-tech","tag-tag-big-tech-stocks"],"_links":{"self":[{"href":"https:\/\/www.europesays.com\/ai\/wp-json\/wp\/v2\/posts\/120336","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/www.europesays.com\/ai\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/www.europesays.com\/ai\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/www.europesays.com\/ai\/wp-json\/wp\/v2\/users\/2"}],"replies":[{"embeddable":true,"href":"https:\/\/www.europesays.com\/ai\/wp-json\/wp\/v2\/comments?post=120336"}],"version-history":[{"count":0,"href":"https:\/\/www.europesays.com\/ai\/wp-json\/wp\/v2\/posts\/120336\/revisions"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/www.europesays.com\/ai\/wp-json\/wp\/v2\/media\/120337"}],"wp:attachment":[{"href":"https:\/\/www.europesays.com\/ai\/wp-json\/wp\/v2\/media?parent=120336"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/www.europesays.com\/ai\/wp-json\/wp\/v2\/categories?post=120336"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/www.europesays.com\/ai\/wp-json\/wp\/v2\/tags?post=120336"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}