Citigroup (C) says that capital expenditures on artificial intelligence (AI) are just getting started.
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200% short exposure to AMZN with AMZOThe New York-based bank is forecasting $801 billion in combined 2027 capital expenditures from leading technology companies Alphabet (GOOGL), Meta Platforms (META), and Amazon (AMZN) as they look to scale their AI infrastructure.
Ronald Josey, a top four-star rated analyst, warns that the heavy spending next year will push all three technology companies into negative free cash flow. The Citigroup analyst raised his capex forecasts across the board heading into this year’s second-quarter earnings season.
The AI capex forecast for 2027 comes as the so called Magnificent 7 technology stocks that also include Apple (AAPL), Microsoft (MSFT), Nvidia (NVDA), and Tesla (TSLA) plan to spend a combined $725 billion on AI this year.
Meta’s revenue by geography. Source: The Fly
AI’s High Costs
Josey stated that “we are materially raising CapEx projections, resulting in negative FCF in ’27E & ’28E for each” of the three companies. The bank raised its 2027 Alphabet capex estimate by 21% to $308 billion, lifted its Meta forecast by 22% to $205 billion, and increased its Amazon projection by 12% to $288 billion.
The analyst said that negative free cash flow at companies the size of Alphabet, Meta and Amazon, which generate hundreds of billions in annual revenue, reflects just how capital-intensive the AI infrastructure buildout has become for the hyperscalers. Several technology companies have turned to the bond market this year to help raise needed funds. Amazon recently announced a $25 billion corporate bond sale.
Comparing Technology Stocks
Below is a chart from TipRanks comparing the three technology stocks mentioned in this article: GOOGL, META, and AMZN. As one can see, each stock has a Strong Buy rating and considerable upside potential from current levels. Each of the three stocks also carries a high smart score of nine or 10.
