Microsoft joins Nvidia in $4 trillion market-cap club; Meta gets close to joining Google and Amazon in $2 trillion club
July 31, 2025 9:00 pm ET
By Rolfe Winkler, Nate Rattner and Sebastian Herrera
The AI arms race is accelerating as the major tech companies add to their already gargantuan levels of spending. The bets are paying off for investors, but not for all employees.
Alphabet’s Google, Microsoft, Amazon, and Meta Platforms are set to spend nearly $400 billion this year on capital expenditures, largely to build their artificial-intelligence infrastructure. That is more than the European Union spent on defense last year.
Those firms and others plan to boost outlays even more. Morgan Stanley projects $2.9 trillion in spending from 2025 to 2028 on chips, servers and data-center infrastructure. The investments, the bank says, will contribute as much as 0.5% of U.S. gross domestic product growth this year and next.
The investments are helping power big increases in the companies’ profits, pushing some of their share prices to records.
Wall Street often looks down on excessive corporate spending. But not here. Microsoft and Meta shares soared Thursday after they reported earnings—and their sizable capital spending—reaching market capitalizations of $4 trillion and nearly $2 trillion, respectively.
Also booming is Nvidia, which designs the chips that tech companies primarily use to build their AI models. It was the first company to surpass $4 trillion in market capitalization. Its shares are up more than 28% this year.
Apple, another Magnificent Seven tech company, spends far less on AI and is facing Wall Street pressure to build up its capabilities. Investors say Apple needs to develop a convincing AI strategy of its own if it wants smartphone buyers to upgrade their devices faster.
Companies are splurging because artificial intelligence promises to remake the lucrative tech market. The big tech companies want to be among the AI leaders. But AI requires intensive data-crunching, forcing tech companies to spend big on construction of new data centers.
The recently passed One Big Beautiful Bill Act is expected to drive the spending even higher. It provides tax relief for companies that frontload investments, freeing up cash flow to increase spending even more.
The infrastructure demands are so huge, though, that companies don’t have enough cash to pay for the investments, according to Morgan Stanley, which estimates a $1.5 trillion financing gap.
Already on the losing end are many of the companies’ workers, nearly 100,000 of whom have been laid off since 2022, according to tracking website Layoffs. Among them are software engineers, whose work is being rapidly replaced by AI.
The AI investments are “a tremendous hit on margins,” said Gil Luria, an analyst with D.A. Davidson. Tech-company cost cutting, he said, is meant to soften the bottom-line blow.
One risk for companies is whether their large investments will pay off. Luria said company profits haven’t kept pace with their spending spree to date, though he is optimistic that increased productivity will ultimately justify the spending.
Amazon shares fell 7% after-market Thursday because the company’s latest quarterly results indicated its cloud business, which hosts AI models, isn’t growing as fast as smaller rivals’. Chief Executive Andy Jassy expressed optimism the unit will perform better.
Investors in AI startups like OpenAI aren’t pressing the profitability issue yet, content to pour in more money so long as valuations keep rising. Other investors, however, have warned that the AI boom has become a speculative frenzy.
Some companies say AI investments are benefiting their core business. Meta says it is leading to higher prices for ads and more usage of its apps.
Tech companies’ capital expenditures aren’t all going to AI. Amazon also spends billions on capital to build up its logistics network. Yet AI investments are taking up a larger portion of its capital costs.
One glaring exception to the AI boom is Apple, which spends a fraction of the other companies and finds itself lagging behind in AI.
Late Thursday, Apple reported solid iPhone sales for its June quarter, with its shares increasing about 3% on the news.
Inside Apple, some researchers are demoralized, say people familiar with their thinking. They struggle to get access to data to train next-generation AI models. The company takes privacy so seriously user data is highly protected, even internally.
And Apple moves slowly, updating software running on its devices only a couple of times a year, compared with rivals who push updates often.
Mark Zuckerberg is exploiting ennui inside Apple’s AI unit, poaching disaffected engineers with pay packages that can run into the hundreds of millions of dollars, say people familiar with them.
What Apple can point to is its efficiency. It generates far more in sales and profit from its capital outlays, compared with its rivals. And with a lean employee base, it has avoided large layoffs entirely.