Big Tech's AI Investments Projected to Surpass $1 Trillion by 2027

Analysts project that major technology companies' capital expenditures on artificial intelligence (AI) could surpass $1 trillion by 2027, following substantial increases in spending plans. Both Evercore and Bank of America have revised their 2027 capex estimates to exceed $1 trillion, with 2026 projections rising to between $800 and $900 billion.

In 2026, spending projections have increased across the board: Alphabet's capex is up 4% to $185 billion, Amazon's by 1% to $200 billion, Meta's by 8% to $135 billion, and Microsoft's by 24% to $190 billion, according to Bank of America. Despite the escalating costs, analysts observe a positive impact on revenue and market valuations. Jefferies analysts noted that while capex continues to rise, return on investment is evident through a substantial backlog and accelerating cloud growth.

Alphabet's backlog has nearly doubled quarter-over-quarter, reaching $462 billion—a 400% annual increase. Brian Pitz of BMO Capital Markets highlighted that the majority of this backlog pertains to core Google Cloud Platform contracts, with over 50% expected to be recognized as revenue within the next 24 months.

While Alphabet's AI-driven strategy yields high returns, other tech giants like Microsoft and Meta have faced investor scrutiny over their AI spending plans. Meta's expansion plans have raised concerns among investors seeking clearer returns on investment. Jefferies analysts indicated that Meta likely remains under scrutiny pending clearer capex ROI. Meta's free cash flow has declined to $1.2 billion in the first quarter from $26 billion in the same period last year.

The sustained growth in capex is beneficial for chipmakers and equipment providers supplying the hyperscalers. Analysts have noted strong and growing demand for various custom application-specific integrated circuits, indicating a potential CPU renaissance over the next several years. RBC Capital Markets maintains positive ratings on companies like Nvidia, Micron Technology, Marvell, Astera Labs, Arm Holdings, and Lattice Semiconductor, suggesting that strong capex trends should also benefit other sector performers.