Big Tech's AI capex push revives confidence in chip and data centre demand

Investors are increasingly focused on the returns generated by AI investments rather than the scale of spending.Fresh capital expenditure commitments from Amazon, Microsoft, Alphabet and Meta Platforms have reinforced expectations that demand for artificial intelligence (AI) chips and data centre equipment will remain robust, easing concerns over a slowdown in spending, according to Bloomberg.Amazon raised its full-year capital expenditure forecast to $220 billion from an earlier estimate of $200 billion, with Chief Executive Officer Andy Jassy saying that most of the investment would be directed toward AI.The announcement came alongside earnings reports from the world’s largest cloud service providers, which showed continued investment in AI infrastructure despite recent market concerns.Microsoft reaffirmed its capital expenditure outlook, excluding the impact of an accounting change.

Alphabet increased its spending guidance, while Meta raised the lower end of its capital expenditure forecast.According to Bloomberg Intelligence analysts Kunjan Sobhani and Oscar Hernandez Tejada, the spending commitments improve the outlook for companies supplying computing and networking chips.“With most large hyperscalers raising or reiterating capital spending plans in their earnings commentary, the likelihood of upside to 2026-27 consensus for computing and networking chipmakers is growing,” the analysts said in a note.Investors seek returns on AI investmentsInvestors well received Amazon’s earnings after the company reported that revenue from its cloud computing business accelerated for the fifth consecutive quarter, indicating that its AI investments were delivering results.Microsoft also received a positive market response after reporting its fastest cloud growth in four years.

The company’s market capitalisation increased by about $450 billion in a single day, which Bloomberg said was the largest one-day gain in market value for any company.Investor reaction to Meta and Alphabet, however, was more subdued.Meta shares fell nearly 8 per cent after the company paired a weaker sales forecast with commitments for almost $700 billion in future spending.Alphabet’s shares dropped 7.1 per cent on July 23, a day after the company projected full-year capital expenditure of $195 billion to $205 billion in 2026, compared with an earlier forecast of $190 billion.According to Wells Fargo analyst Ken Gawrelski, investors are increasingly focused on the returns generated by AI investments rather than the scale of spending.“Go back 12 to 18 months ago, it was about how much could you spend and how much capacity could you bring online,” said Gawrelski. “Now the market has pivoted, and is rightly focused on the return on investment.”Chip sector sentiment improvesThe latest spending commitments have also improved sentiment for semiconductor and infrastructure suppliers that had come under pressure in recent weeks.Bloomberg reported that memory chip manufacturers Samsung Electronics and SK Hynix rebounded after earlier declines, while companies including CoreWeave, Nebius Group, Intel and Nvidia also recovered from recent weakness.Bloomberg also reported that several of these companies were among the publicly traded holdings of Leopold Aschenbrenner’s hedge fund, Situational Awareness, which reduced some equity positions after recent losses during the AI stock sell-off.Despite the improved outlook, Bloomberg Intelligence cautioned that sustained gains for semiconductor stocks are not guaranteed.“For semiconductor stocks, it should help stabilise sentiment, but might not be enough to swing things around for a large upside in stocks,” said Sobhani.