Tech giants are lining up over $300 billion in AI spend. Their CEOs are betting cheaper models will drive up AI demand.

• Amazon, Google, Microsoft, and Meta are ramping up AI-related capital expenditure.
• Combined spending from the tech giants is set to surpass $320 billion in 2025.
• Some investors are concerned about the timeline for these bets to provide a return on investment.

Amazon, Microsoft, Google, and Meta have signaled that their AI investment spree is far from over.

According to recent earnings reports, their combined capital expenditures are set to exceed $320 billion in 2025, even as investors question if the spending is justified following the launch of a seemingly more efficient model from China's DeepSeek.

It's a sharp increase from the $246 billion the four companies spent in 2024 as they race to build data centers, acquire AI chips, and expand cloud computing capacity to power large language models and enterprise AI tools.

Stocks of Google and Microsoft dropped after their earnings reports, reflecting investor anxiety over whether large AI infrastructure spending will translate into returns.

Tech executives have been responding with a similar message to these concerns: cheaper AI will lead to higher demand for AI products.

Amazon is leading the capex charge, planning to allocate over $100 billion in capital expenditures this year, up from $77 billion in 2024. The vast majority will go toward expanding Amazon Web Services and scaling AI infrastructure, the company said.

CEO Andy Jassy defended the spending during the company's earnings call on Thursday, pointing to "significant signals of demand" for AI-powered services.

"When AWS is expanding its capex, particularly for a once-in-a-lifetime type of business opportunity like AI, I think it's actually quite a good sign, medium to long term for the AWS business," Jassy said.

CFO Brian Olsavsky echoed this sentiment and said Amazon is not worried about DeepSeek undermining its AI bets.

"Customers will keep spending on the technology," Olsavsky said.

Despite the optimism, Amazon's stock fell more than 5% after the company announced its spending plans.

Meta's AI spending is also ramping up.

Meta expects $60 billion to $65 billion in capital expenditure this year, up from $39 billion in 2024. CEO Mark Zuckerberg told investors in an earnings call last month that AI will be central to the company's revenue growth strategy.

He said the company is "investing aggressively in initiatives that use these advances to increase revenue growth," referring to its AI investments.

Meta is also pushing to establish an "American standard" for open-source AI models, a move that could distinguish its approach from rivals.

Meta's AI investments have been more positively received by investors, with shares rising following its earnings call. Analysts have attributed this to Meta's ability to monetize AI through ad targeting, demonstrating real-time returns on investment.

Google parent company Alphabet has doubled down on AI, planning about $75 billion in capital expenditures for 2025 — above analyst expectations of $58 billion.

But despite its ambitious AI push, Google's stock fell more than 8% after its Tuesday earnings, as investors reacted to slowing cloud growth and concerns over its AI strategy.

CEO Sundar Pichai defended the spending, pointing to Google's leadership in AI and the need to build infrastructure for future applications.

"The company is in a great rhythm and cadence — building, testing, and launching products faster than ever before," Pichai said during an earnings call on Tuesday. "This is translating into product usage, revenue growth, and results."

However, some analysts worry that Google's AI offerings, like the Gemini chatbot, have yet to prove their ability to generate meaningful revenue.

Microsoft plans to spend $80 billion on AI-related infrastructure in 2025, positioning itself as a major player in the AI cloud race.

CEO Satya Nadella emphasized that demand for AI services is exceeding expectations.

"Already, our AI business has surpassed an annual revenue run rate of $13 billion, up 175% year-over-year," Nadella said in an earnings release.

Last month, Nadella referred to the Jevons paradox, the idea that as the cost of using a resource falls, demand will go up — not down.

"As AI gets more efficient and accessible, we will see its use skyrocket, turning it into a commodity we just can't get enough of," Nadella said in a post on X.

However, despite strong AI revenue growth, Microsoft's stock still dipped after earnings. Some analysts argue that while Microsoft has a head start thanks to its OpenAI partnership, it has yet to convert AI hype into sustained long-term revenue.

AI spending gamble?

Not everyone is buying into Big Tech's AI spending spree.

Some investors worry that the race to dominate AI could turn into an expensive gamble — especially if it turns out that cheaper methods for training and running models mean companies have overstretched with their capex spend.

"Investors are demanding clearer timelines on when AI spending translates to earnings and sales growth, not just promises," said Jesse Cohen, senior analyst at Investing.com.

Others, like Dan Ives, managing director at Wedbush Securities, don't see DeepSeek as a threat to Big Tech capex spending.

"Huge week for Big Tech earnings as Zuckerberg, Nadella, Cook, and Musk doubled down on their AI visions and what this means for each of these tech stalwarts looking ahead," he said in an X post last month. "This is an AI arms race and the Temu of AI DeepSeek not changing that…AI Revolution just starting."