Big Tech's AI capital spending surges sixfold in three years

Capital spending by the five big tech firms—Microsoft, Alphabet, Amazon, Meta, and Oracle—on AI data centers and related facilities is set to reach $945.55 billion as of January next year, roughly six times the 2023 level, underscoring how heated the infrastructure race has become amid the AI boom.

The financial burden is also growing. The five companies' free cash flow is projected to swing from a surplus of $223.11 billion over the same period to a deficit of $2.87 billion.

Financial markets are beginning to react. Immediately after Meta disclosed an $825 billion AI infrastructure investment commitment, its credit default swap (CDS) premium rose 8.9 basis points from the previous trading day to 119.3 basis points. The larger the investments become, the more wary bond markets grow.

The investment race for AI supremacy has entered a funding phase. With their cash reserves shrinking, big tech's aggressive spending is expected to have an increasingly large impact on financial markets as well as the broader semiconductor and infrastructure industries.