Big Tech companies are ramping up their spending on artificial intelligence, with Amazon (AMZN), Alphabet (GOOGL), Microsoft (MSFT), and Meta (META) expecting a combined total of $364 billion in capital expenditures for 2025. This is a sharp increase from their prior forecast of $325 billion earlier this year. Nevertheless, despite the massive spending, investor reactions were mostly positive, with shares of Meta, Microsoft, and Alphabet rising after their recent earnings reports showed strong results.
Elevate Your Investing Strategy:
- Take advantage of TipRanks Premium at 50% off! Unlock powerful investing tools, advanced data, and expert analyst insights to help you invest with confidence.
Microsoft led the group with $88.7 billion in capital expenditures for Fiscal 2025, which exceeded its earlier projections. Separately, Meta raised the lower end of its spending outlook for a new range of $66-$72 billion. This was due to aggressive AI data center investments and talent recruitment. In addition, Alphabet boosted its estimate from $75 billion to $85 billion, thanks to strong demand for its Google Cloud services. As a result, analysts responded positively, with Wedbush raising Meta’s price target to $920, RBC lifting Microsoft’s to $640, and Needham increasing Alphabet’s to $220.
However, Amazon was the outlier, with its shares falling despite forecasting $118.5 billion in spending. The drop was due to worries about weaker operating income guidance at Amazon Web Services, even as its AI business grows at triple-digit annual rates. Interestingly, though, while AI investments are making many investors optimistic, some market observers, including Apollo’s Torsten Sløk and short-seller Jim Chanos, warn that an AI bubble could form that surpasses the dot-com era.
Which Big Tech Stock Is the Better Buy?
Turning to Wall Street, out of the four stocks mentioned above, analysts think that AMZN stock has the most room to run. In fact, AMZN’s average price target of $259.87 per share implies more than 20% upside potential. On the other hand, analysts expect the least from META stock, as its average price target of $850.98 equates to a gain of 13.4%.
