YOU AIN’T seen nothing yet. Last year America’s biggest technology companies, including Amazon, Google and Microsoft, spent $450bn on infrastructure, much of it to power artificial intelligence. This was just an amuse-bouche. For the main course they will this year spend $900bn on chips, data centres, power and so forth, with a $1.4trn pudding to follow in 2027. To fund this feast they have borrowed more than $400bn this year. The AI capex boom is fast becoming the largest investment surge in history (see chart 1).
If superintelligence is in reach, building football fields’ worth of compute could also be history’s most valuable capital-allocation exercise. And yet capital spending can still generate disappointing returns for investors. Since peaking in June, the share prices of the biggest AI firms have fallen by 15%, as worries have mounted that healthy returns will be hard to come by. After Alphabet, Google’s parent, reported second-quarter earnings on July 22nd, its shares dropped by 7%. (Results are due from Microsoft and Meta on July 29th and from Amazon the next day.) On July 28th South Korea’s benchmark index, dominated by Samsung Electronics and SK Hynix, two big chipmakers, fell by a tenth.
