"The scale of it is nuts" as Big Tech pours US$1.5 trillion into AI
Amazon and Meta reported sharply diverging results this week, with Amazon's cloud revenue accelerating and Meta's costs climbing faster than its sales, as the largest technology companies laid out the scale of their artificial intelligence spending.
Amazon posted second-quarter net sales of US$200.6bn, up 20 percent from a year earlier, the company said, while its Amazon Web Services cloud unit grew 37 percent to US$42.2bn, its fastest pace in more than four years.
Net income reached US$62.6bn, or US$5.75 a diluted share, though Amazon noted that figure included a US$53.4bn pre-tax gain drawn largely from its stake in AI developer Anthropic.
Free cash flow swung to an outflow of US$7.6bn over the trailing twelve months, the company said, from an inflow of US$18.2bn a year earlier, driven by AI infrastructure spending.
Meta went the other way.
Revenue rose 28 percent to US$60.8bn in the quarter, but total costs and expenses climbed 55 percent to US$42.03bn, the company reported, and free cash flow fell to US$784m.
Meta guided third-quarter revenue to between US$61bn and US$64bn in its release, below the roughly US$63.15bn analysts had expected, according to CNBC.
Microsoft reported 43 percent growth at its Azure cloud business, ahead of forecasts, and said paid seats for its Copilot AI assistant had passed 30m, up from more than 20m in April.
Apple, by contrast, spent far less: its June-quarter capital expenditure came to US$2.46bn, the network said, a fraction of the sums committed by its peers.
That gap sits at the centre of the week's story.
Amazon, Alphabet, Meta and Microsoft are on track to spend a combined US$1.5tn on data centres across this year and next, the New York Times reported, citing FactSet estimates, and the four spent US$170bn between April and June alone, up 72 percent from a year earlier.
"The scale of it is nuts," Melissa Otto, who leads research at S&P Global's Visible Alpha division, told the paper.
Amazon signalled more to come.
Andy Jassy, the company's president and chief executive, told investors on the earnings call that capital spending would reach about US$220bn this year, up from an earlier US$200bn plan, CNBC reported, and warned demand would still outrun capacity.
"In fact, the demand we already have for 2028 is striking," Jassy said.
Apple's Tim Cook, on what CNBC reported was his final earnings call before becoming executive chairman on Sept 1, defended his company's lighter approach, arguing that running AI tasks on iPhones and Macs rather than the cloud is an edge.
"The ability to run some percentage of requests on device is also very strategic and sort of a competitive weapon," Cook said.
The borrowing behind the buildout has begun to unsettle credit investors.
A gauge of the risk in holding these firms' debt has climbed to record highs, the Financial Times reported, citing LSEG data, with credit default swaps tied to Oracle, Alphabet, Amazon, Meta, Broadcom, Nvidia and SpaceX all touching records in recent days.
Oracle's five-year swaps traded at 215 basis points on Monday, up from 144 at the start of the year, per the same data, meaning investors now pay US$215,000 a year to insure US$10m of its debt against default.
"For hyperscalers, watch CDS, not EPS," Manish Kabra, head of US equity strategy at Société Générale, said, using shorthand for credit default swaps and earnings per share.
Investors delivered split verdicts on the earnings.
CNBC reported that Microsoft climbed 15 percent on Thursday, its strongest session since 2008, adding close to US$450bn in market value even after holding its 2026 capital spending forecast steady.
Amazon shares jumped more than 10 percent in extended trading, while Meta fell nearly 8 percent and slid for an 11th straight day, down more than 20 percent over that stretch.
Alphabet, which reported negative free cash flow in the second quarter for the first time since its 2004 public listing, saw its shares drop more than 6 percent the next day, the New York Times reported.
