Big Tech is finally plowing their cash & their investors’ cash into the economy.
By Wolf Richter for WOLF STREET.
Five companies announced that combined they plan to make about $700 billion in investments in 2026. The bulk of these capital expenditures are related to AI with a focus on AI infrastructure – data centers and everything in them and around them, from AI servers to onsite power-generation equipment if the utility cannot supply the juice.
- Amazon: $200 billion
- Alphabet: $175-185 billion
- Meta: $135 billion
- Microsoft: $145-150 billion
- Oracle: $42 billion
The market has not been enthusiastic about this spending binge, fearing that this cash that gets spent will sooner or later come out of share buybacks; and that is already happening.
If these five companies actually make the announced capital expenditures and the funds flow into the economy in various forms, they would amount to 2.1% of current-dollar GDP.
Other companies are also cranking up capital expenditures, though not as much, and the overall capex figures are much larger. So overall, this is a big stimulus for the economy for as long as it persists.
A stock market crash would end the binge. Think of the Dotcom Bust, when the S&P 500 plunged by 50% and the Nasdaq by 78% over a span of 2.5 years. As thousands of companies collapsed and vanished, and the stocks of the survivors crashed, capex and corporate spending got slashed left and right. It triggered a run-of-the-mill recession in the US overall and a depression in the tech areas. Lots of people are holding their breath, but it hasn’t happened yet.
Where will this $700 billion in cash come from?
The cash for these investments of $700 billion would come from a mix of:
- Share buybacks get cut (already happening)
- Share issuance (already started)
- Debt issuance (oh-la-la)
- Their massive hoard of cash and short-term investments
- Their huge operating cash flows.
Cherry on top: There are the massive and accelerated tax cash-benefits for investments in 2026 that will provide some additional funding.
Share buybacks get cut. This has already happened. So actual share buybacks, not announcements:
Oracle flipped from share buybacks to a share issuer, which has the opposite effect of share buybacks. In 2025, it issued $2.1 billion in new shares, largely the result of its stock compensation plans. In February, it launched a $20 billion at-the-market share offering (see below).
Amazon last bought back shares in Q2 2022 ($3.3 billion), and has had zero share buybacks since then, investing the funds instead in its AI endeavors.
Meta cut back share buybacks to $3.3 billion in Q3 and Q4 2025 combined. Share buybacks in the same period in prior years:
- $8.8 billion in Q3 and Q4 2024
- $9.5 billion in Q3 and Q4 2023
- $31.2 billion in Q3 and Q4 2022
- $33.5 billion in Q3 and Q4 2021.
Alphabet cut its share buybacks to $17 billion in Q3 and Q4 combined. Share buybacks in the same period in prior years:
- $30.6 billion in Q3 and Q4 2024
- $32.0 billion in Q3 and Q4 2023
- $30.0 billion in Q3 and Q4 2022
- $26.1 billion in Q3 and Q4 2021.
Microsoft reduced its share buybacks in 2024 and 2023, then increased them some in 2025. The share buyback peak remains in 2021 and 2022.
For these five companies, share buybacks combined in Q4 plunged to $12.6 billion, the lowest level since Q1 2018.
At the peak in 2021, these five companies spent $149 billion on share buybacks. If share buybacks of all of them go to zero, that would provide $149 billion in cash compared to 2021.
In addition, there are massive and accelerated tax cash-benefits to investing in 2026, while share buybacks are taxed. So after tax effects, the cash generated by ending share buybacks and investing these funds in AI infrastructure are very substantial (share buyback data via YCharts):
Share issuance: This also is now in the works. Oracle was the first out of the gate. It announced this month that it would raise $20 billion by selling new shares “at-the-market,” which allows it to sell the shares in dribs and drabs over time.
But it’s not free. The price of its shares has plunged by 58% in five months from the high in September, to $142.82. If they fall by another $40 a share, back to where they’d been in December 2023, they’d qualify for our pantheon of Imploded Stocks, for which the minimum requirement is a 70% plunge from the more or less recent high.
Share prices of the other four companies are still sky-high, and they can easily sell shares at very high prices, which would be efficient for them to do, but that would come only after they stop the share buybacks entirely.
Debt issuance. Oh-la-la. Oracle’s capital raise announced in February included a $25-billion bond offering, which was met with ravenous demand from investors (orderbook $129 billion). In September 2025, Oracle had already raised $18 billion in a debt sale. At the end of Q4, so not including the $25-billion debt sale, Oracle had $131 billion in short- and long-term debt.
Meta, which has $85 billion in short- and long-term debt, issued $30 billion in bonds last October. Then it took on another $27 billion in debt, but kept if off its balance sheet via a Special Purpose Vehicle (SPV), an outfit called Beignet, that issued the bonds to fund a huge data center in Louisiana. Meta is backing the bonds with debt-like guarantees. It guarantees the construction risk. Its rent payments cover the interest payments of the bonds. Its residual value guarantee is to be used to pay off the bonds. If Meta wants to bail out of the deal, it has to make bondholders whole by paying off the remaining amounts after the data center is sold. But the advantage for Meta is that its credit rating won’t get dinged.
Amazon, which has $167 billion in short- and long-term debt, pulled off a $15-billion bond offering in November 2025, also amid ravenous demand from investors.
All of the five companies have at the moment lots of room left to sell bonds amid huge demand for bonds from investors. Four of them have still very high to stellar credit ratings: Microsoft ‘AAA’; Alphabet ‘AA+’; Meta ‘AA-’ ; and Amazon ‘AA-’. Oracle at ‘BBB’ is two downgrades away from “junk” which starts at BB+ (my cheat sheet for corporate bond credit ratings). But even a junk rating of ‘BB+’ or ‘BB’ would only mean slightly higher yields these days, with still ravenous demand from investors. Everyone is chasing yield.
Their cash hoard. Cash and short-term investments could partially be used to fund capex. At the end of 2025:
- Amazon: $126 billion
- Alphabet: $127 billion
- Microsoft: $95 billion
- Meta: $82 billion
- Oracle: $16 billion.
Operating cash flow. In 2025, four of these companies generated massive operating cash flows (Oracle not so much), and similar cash flows in 2026 would help fund the investments:
- Alphabet: $165 billion
- Amazon: $139 billion
- Microsoft: $136 billion
- Meta: $115 billion
- Oracle: $20 billion.
Big Tech is plowing their cash & their investors’ cash into the economy.
When these companies don’t blow their cash on buying back their own shares, but instead use the funds to invest in AI infrastructure, they’re plowing their cash, and by extension, their shareholders’ cash, into the real economy, contributing to economic growth. I have long advocated for this shift, and it is now happening, though shareholders won’t like it.
When they issue new shares, to invest the proceeds in AI infrastructure, they’re plowing the cash from these investors into the economy. Shareholders get diluted, but the economic growth gets stimulated.
When they issue new debt to invest the proceeds in AI infrastructure, they’re plowing the cash from these yield-chasing investors into the economy. These investors like that, which is why they’re buying the debt, and the economy likes it. Shareholders maybe not so much, or maybe they don’t notice.
When they use part of their cash hoard, they’re handing Treasuries and corporate securities to other investors, and are plowing the proceeds into the economy. As long as they still have enough cash, everyone is happy with that.
When they use their operating cash flow to fund these investments, the economy benefits. That’s what operating cash flow is for, to invest and grow.
So as long as the financial markets can be kept spinning, this investment binge will continue to be a big stimulus for the economy.
In case you missed it: PayPal Shares Plunged 86% from the 2021 Goofball High and Right into our Imploded Stocks
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The shareholders can go eff themselves, it’s about time these companies made the rest of America wealthier. Our electricity grid is crap, they should start there.
I take it that you are not invested in stocks atm?
Which is superior for the economy.
Infrastructure or an individual share price?
JPMorgan calculated last fall that the tech industry must collect an extra $650 billion in revenue every year — three times the annual revenue of AI chip giant Nvidia — to earn a reasonable investment return. That marker is probably even higher now because AI spending has increased.
OpenAI, which unleashed the nation’s AI mania with the public debut of ChatGPT in late 2022, expects to lose more than $100 billion through the end of the decade, the technology news publication the Information reported in September.
Companies might never achieve a decent return on these investments. But that’s a problem for stockholders, not for the capex investments or the economy.
So read the article. It explains why for stockholders, this is not an ideal situation. But they have been spoiled for so long. Now they’re going to do some heavy lifting.
How does this affect the companies they’re paying? The data center developers, the contractors, the suppliers?
Written by someone with a BS in economics from Wharton mind you, using the reduce to the ridiculous method. The number, $35/iphone user, is an attempt to make $650B seem unattainable.
1. There are nearly 5B mobile phone users in the world. If the average revenue increase is $2/mo per user thats $120B
2. Regarding streaming, thats 1B subscribers. Again $2/mo is $50B
3. The top 25 companies have $7T in annual revenue. If AI adds just 2% thats $140B
That’s just touching the surface on the revenue side.
What about cost cutting?
If AI displaces just 3% of the US workforce alone at average incomes of 70k, thats $350B.
So there is your $650B and that is just scratching the surface.
I have a tiny retail business and AI, even at this early stage with our limited use, has its imprint all over it in the form of productivity, cost cutting, and increased revenue.
The capex spending these companies are commiting to will without doubt pay huge dividends. These will be perhaps the same or maybe new generation titans of industry.
Many companies will vanish and burn large sums of investors money in the process.
Just as before; new cycle same outcome.
The value of AI investment should be crystal clear to anyone with business acumen. That in no way justifies the valuations of many AI related companies. Two very different topics.
Apple not playing?
Dabbling.
About $14 billion
Apple loyalists will buy whatever they make and not care too much about AI.
“Apple AI how do I read magazines more effectively?”
/s
The illogical thinking of every company in America…except for goosing the stock options.
Stock buybacks when stock prices are insane.
Issue more shares when stock prices plummet.
“Share prices of the other four companies are still sky-high, and they can easily sell shares at very high prices, which would be efficient for them to do, but that would come only after they stop the share buybacks entirely.”
The customers of these companies are not you and me, nor the mom and pop shareholders. Their real customers are the Wall Street whales and market movers who are happy to trade short term losses for massive long-term gains. From that perspective, those moves are very logical.
what public stocks will be the best positioned to profit from all this capex spending ? just a question for all you smart commenters and wolf…………thank you for your attention to this matter. please LOL
These investments are fantastic to see.
Is the 700 billion all in the US? Or is there a breakdown by region?
700 billion/52 weeks = $13 billion a week or just under 2 billion day. The Chinese abacus is now much larger/longer. I can’t fathom this amount.Scary all these techno nerds with so much money. Good luck to all the players.
While the general idea of “plowing cash back into the economy” is directionally correct, the specific content of the capex, in this case, is mostly wasteful and ridiculous.
We do not need more “data centers.” And when we blow capital on this stuff, it is no longer available for things we really do need. The only benefit that the real economy will derive from this is a very short building boom of a few years’ duration – a classic boom town cycle. We can ask the shale patches in South Dakota how well that worked out for the folks there.
This seems to be a real dilemma. If AI “works” (it won’t, but let’s just pretend for argument’s sake), then it will displace millions of workers in the real economy, who will be jobless and broke while the efficiency gains accrue to the billionaire class. If it doesn’t work, then we will have wasted all this capital by building Ozymandian monuments to digital nothingness.
It’s hard to see how anybody benefits from any of this.
That’s a silly comment. Just like we don’t need no effing cars. Horses will do just fine.
AI works and has been used everywhere already for years, and its use has been expanding at a very rapid pace, as has its capabilities. You just didn’t notice? Maybe get out a little more often?
I just listened to the Nobel peace prize talk about AI.
Their words were “it’s uses are shallow at the moment”
And “obviously this massive build up will crash just like the .com bubble”
these are Europeans , smart ones, real smart.
Hehe , so who knows
Quite true dependent upon your definition of shallow. However, they know how to make it deeper: increase the number of tokens in an LLM, increase the complexity of the attention algorithms, and execute improved training systems. All of which require one thing: a massive data center build-out for more storage and compute power. The question really isn’t will it get to “deep” (it will), the question is whether or not they can monetize the product well-enough in the meantime to keep shareholders happy. The problem with Europeans is that they don’t tend to think in crazy big terms.
This AI data-center boom echoes railroads or fiber, massive capex before we really know if the productivity shows up. We are probably already running into diminishing returns on scaling, but the spending just keeps going.
Also, big part of the AI story is “augmentation” (not replacement, as they say) one person doing the work of many. But if that’s true, what happens to the other workers? Let’s say mass layoffs don’t happen, the idea then is that productivity would rise because output per worker goes up. But if AI lets, for example, one lawyer do the work of three, or one marketer produce 10 times content, or one analyst run 100 times simulations. Do we really need 3 times more lawsuits or 10 times more ads or 100 times more reports? I would think not. So the extra capacity doesn’t automatically translate into extra spending.
I guess it all depends on whether AI creates new categories of spending or mostly optimizes existing ones. Either way, I think it will be less than the capex implies.
It’s like the Adam smith pin factory.
AI taking jobs frees humans to do other more important jobs.
As the specialized slower pin masters can do something more beneficial for the nation.
In theory
Excellent article Wolf.
Can you now apply this analysis of A.I. spending to upcoming earnings pressures? My understanding is that these “hyper scalers “ have extended the depreciation schedule on the expensive chips they are buying.
Yet earnings pressures are mounting, correct?
“Hey, My horse has more than “one horse power” ! And he is offended, Henry Ford would suggest such a thing” pssstt!