Tech Giants’ $720 Billion AI Bet Reshapes Economy

Amazon, Microsoft, Google and Meta plan to spend more than $720 billion this year on data centers and other capital expenses, helping prop up the U.S. economy. The four corporations are racing to build artificial intelligence infrastructure, spending roughly triple what they did two years ago. They expect to spend even more next year.

Corporate spending, public consequences

The corporate buildout reaches far beyond company balance sheets. According to the article, the artificial intelligence boom accounts for much of the U.S. economy’s resilience, while decisions by a handful of companies shape a substantial share of business investment. The Commerce Department reported that the economy grew at a 3.4% annual pace from July through September, up from 2.2% in the prior quarter. Economists surveyed by FactSet had expected growth of 3%.

Business investment surged, reflecting the AI boom. Investment excluding housing rose 12.7%. Spending on information-processing equipment climbed 37.4%, software investment grew 9.6%, and research and development investment increased 7.5%. Consumer spending rose at a 3.8% rate.

Housing went the other way. High mortgage rates hurt the sector: housing investment fell 3.3% and had declined in six of the previous seven quarters. The report brought two opposing currents into focus: surging investment in corporate technology infrastructure and a continued slump in housing investment.

The bill comes due later

The four companies set a quarterly spending record as they raced to expand AI capacity. Most spend more cash on data centers than their businesses bring in. Some have taken out loans or sold stock to finance their plans, and investors question which investments will pay off. Their core businesses generally remain healthy, but the scale of spending has made returns a pressing uncertainty.

“ Slight differences is causing a lot of volatility,” said David Tsui, a technology credit analyst at S&P Global Ratings. Tsui said uncertainty could last several more years because “you're spending now and a lot of the return is going to be years down the road.” The costs arrive now. The promised returns lie years ahead.

Amazon spent more than $77 billion on property and equipment in the third quarter, far more than analysts had estimated. The company is building data centers and trying to meet demand for AI services. That spending contributed to a free cash outflow of $42.4 billion.

Amazon reported revenue of $201.9 billion, up 12%. Sales at Amazon Web Services, its cloud unit, accelerated for the sixth straight quarter. Its core online business, however, showed signs of sluggish growth. The company’s huge infrastructure spending sits alongside a business that isn't growing evenly.

Investors watch the giants borrow and build

Market reactions have reflected concern about whether the spending will deliver. Google shares fell more than 12% the day after its quarterly earnings report. Amazon shares fell more than 4% after results showed heavy spending. Meta shares fell 7% the previous week after its results showed it was issuing new stock to raise funds.

Oracle and SpaceX have also sharply increased spending and borrowing, bringing their capital expenses closer to those of their much larger rivals. The Commerce Department’s Thursday report was the first of three estimates of third-quarter GDP growth. The U.S. economy had remained resilient amid higher energy prices caused by fighting with Iran. For now, the numbers tie that resilience in substantial part to corporate AI investment, even as the companies spend cash, borrow, and issue stock to build infrastructure whose returns may take years.