Tech’s AI Spending Spree May Be Bigger Than You Think
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Tech’s AI Spending Spree May Be Bigger Than You Think
It’s early days for AI. So, naturally, there are lots of unanswered questions – and one of the big ones is about how much companies will spend on the technology. A team of researchers at Morgan Stanley attempted to answer that, by checking out the capital expenditure (capex) plans of some of the world’s biggest spenders.
Now, the investment bank was already bullish on AI before the latest quarterly results dropped. But it really leaned into its livestock ways after checking out the capex plans of the market’s biggest players – think: Microsoft, Meta, Alphabet, Amazon, and Tesla. When it refreshed its model with the updated data, it concluded that a cloud capex “supercycle” is set to begin this year.
Morgan Stanley’s “cloud capex tracker” now predicts 44% spending growth in 2024 from last year – well outpacing the 26% the model was forecasting just a couple of months ago. And it’s a positively massive acceleration from the tiny 2% growth in spending seen in 2023. That’s a big deal for the supply chain.
Top ten cloud providers (excluding Amazon): capital expenditures annual growth estimates, before and after the companies’ recent quarterly results. Note that Amazon was left out here because much of its spending goes toward building its ginormous logistics centers. Sources: company earnings reports, Refinitiv, Morgan Stanley.
Top ten cloud providers (excluding Amazon): capital expenditures annual growth estimates, before and after the companies’ recent quarterly results. Note that Amazon was left out here because much of its spending goes toward building its ginormous logistics centers. Sources: company earnings reports, Refinitiv, Morgan Stanley.
And it’s not exactly a one-time spending spree: further growth is expected through 2030. Morgan Stanley’s model forecasts that 2030’s global cloud AI capex will reach $300 billion – with $230 billion spent on semiconductors and $70 billion on hardware.
The planned increased spending is good for Nvidia and other companies across the AI supply chain. That’s a huge part of the reason why Nvidia has been moving sharply higher ahead of its May 22 quarterly update, as traders increasingly expect big things. Let’s look at some of the capex plans from the big spenders:
Meta’s planning to spend as much as $40 billion this year, up from its previous $37 billion plan, as the company speeds its investment to support its AI roadmap. And the Facebook and Instagram parent expects this to be the beginning of a multiyear cycle.
Microsoft’s total capex was $14 billion in the first quarter, and the company said it expects it to rise significantly next quarter and next year.
Alphabet’s not exactly tightening its purse strings – Google’s parent said its quarterly capex will match or exceed the first quarter’s $12 billion, suggesting an increase of at least 50%, compared to last year.
