"Capital expenditures-capex, meaning the big-ticket purchases that fund the data centers, servers, and power infrastructure undergirding the AI race-is fueling record-high, multi-trillion dollar tech valuations when investors think the spending is warranted. But companies get punished when investors worry they might not see returns that justify hundreds of billions in spending."
"Alphabet is the latest example. During its Wednesday fourth quarter earnings call, CEO Sundar Pichai and chief financial officer Anat Ashkenazi revealed that the $4 trillion tech giant will spend between $175 billion to $185 billion in capex in 2026, possibly doubling the $91.4 billion it spent in 2025 and a far cry from the $52.5 billion spent as recently as 2024. In Q4 alone, Alphabet's capex investment reached $27.9 billion."
"The move is part of what Pichai described as maintaining a brutal pace to compete in AI, which is driving every single dominant player in the space-Alphabet, Anthropic, OpenAI, Meta, Microsoft, and others-to invest heavily in innovation and infrastructure in a fierce competition that shifts quarter to quarter. "We are in a very, very relentless innovation cadence, and I think we are confident about keeping that momentum as we go through 2026," Pichai said on the company's Q4 earnings call Wednesday."
Massive capital expenditures are driving record-high tech valuations when investors believe spending will produce returns, while perceived overinvestment triggers punishment. Alphabet plans $175–$185 billion in capex for 2026, up from $91.4 billion in 2025 and $52.5 billion in 2024, with Q4 capex at $27.9 billion. Companies across the AI sector are accelerating infrastructure and innovation investments to compete. Executives emphasize a relentless innovation cadence but cite worries about compute capacity, power, land, supply-chain constraints, chip manufacturing bottlenecks, and the extended timelines required to convert spending into operating data centers.
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