Silicon Valley tech giants set to pour $400 billion into AI, raising investor concerns

Silicon Valley’s biggest companies are planning to invest a staggering $400 billion in artificial intelligence (AI) efforts this year, but many say this sum still won’t be enough to meet the surging demand for AI capabilities.

Meta Platforms, Microsoft, Amazon, and Alphabet have all indicated they will need to significantly increase spending over the next few years to stay competitive in the race toward artificial general intelligence (AGI), a goal that could give them a distinct edge in the tech industry, The Wall Street Journal says in its analysis. 

Despite the massive investments, companies like Meta and Microsoft are already facing capacity constraints. Meta, which is trying to train new AI models while maintaining its existing products, said that its resources are stretched thin.

“We’ve been short [on computing power] now for many quarters. I thought we were going to catch up. We are not. Demand is increasing,” said Amy Hood, Microsoft’s chief financial officer.

As demand for AI-driven services continues to grow, Microsoft plans to double its data-center footprint in the next two years, while Amazon is racing to expand its cloud infrastructure.

“You’re going to see us continue to be very aggressive in investing capacity because we see the demand. As fast as we’re adding capacity right now, we’re monetizing it," Amazon CEO Andy Jassy remarked. 

Investors, however, have been mixed in their reactions to the companies’ spending plans. Meta shares fell 11% following its earnings call, and Microsoft’s stock dropped nearly 3%.

Meanwhile, shares of Google and Amazon saw a boost, rising 6% and 10%, respectively, after announcing their AI investments. The divergence in stock movements highlights uncertainty over whether the vast spending will lead to the promised returns.

The tech giants argue that investing heavily in AI is critical for staying ahead of the competition.

"Whoever gets to AGI first will have an incredible competitor advantage over everybody else, and it’s that fear of missing out that all these players are suffering from," said Youssef Squali, lead internet analyst at Truist Securities. “The greater risk is to underspend and to be left with a competitive disadvantage.”

However, skeptics question whether the billions spent on large language models, which are currently the most popular AI systems, will ever result in AGI. Some also point to the relatively small user base of existing AI technologies, questioning whether these investments will pay off in the long term.

Google, which has committed to increasing its capital expenditures from $85 billion to as much as $93 billion this year, has already seen some returns from its AI investments.

"We already are generating billions of dollars from AI in the quarter," said Google CFO Anat Ashkenazi. "But then across the board, we have a rigorous framework and approach by which we evaluate these long-term investments."

In contrast, Meta has been more cautious with its projections, offering no new details about AI model releases or product timelines, leaving some investors concerned about the company’s path forward. Meta's capital expenditures, which nearly doubled to $72 billion this year, are expected to grow even further in 2026.

However, CEO Mark Zuckerberg emphasized that the company was committed to building AI capacity aggressively.

"I think it’s the right strategy to aggressively front load building capacity. That way, we’re prepared for the most optimistic case," Zuckerberg said. "In the worst case, we would just slow building new infrastructure for some period while we grow into what we build."

The focus on AI investments comes as companies like Microsoft and Meta continue to face challenges in balancing AI research with their existing business operations. Meta’s ad business, for instance, is currently operating in a “compute-starved state” as the company prioritizes AI development over its core platforms.

Apple, which has also increased its AI spending, remains a smaller player in comparison to its rivals, with its total investments falling short of the other tech giants.

As Silicon Valley firms press forward with their AI ambitions, the future of AGI remains uncertain, with both immense potential and significant risks for those betting billions on its realization.

By Sabina Mammadli