Big Tech Strikes Gold With AI, but at a Steep Cost

Big Tech’s recent earnings show AI is driving revenue growth for Microsoft and peers, but the surge in demand for chips, servers and data-center capacity is pushing capital spending and input costs sharply higher. Microsoft, Alphabet, Meta and Amazon together spent about $410 billion on capex last year and are set to spend an additional >$670 billion in 2026, while Morgan Stanley projects roughly $2.9 trillion in AI-related infrastructure spending from 2025–28. Rising memory-chip prices and shortages across fiber, power and land are creating capacity constraints that could lift costs and weigh on margins despite stronger top-line momentum. Analysts see winners among “picks-and-shovels” suppliers, but caution that hefty, sustained investment could temper broader investor enthusiasm.