AI capital spending by the four largest U.S. cloud and platform companies reached a new high in the second quarter of 2026. Alphabet (GOOGL) spent $44.9 billion on property and equipment in the quarter and $80.6 billion in the first half, and raised its full-year 2026 range to $195 billion to $205 billion from $180 billion to $190 billion [1][5]. Meta Platforms (META) spent $31.1 billion and guided to $130 billion to $145 billion for the year [3], while Amazon (AMZN) spent $173.0 billion over the trailing twelve months, up 64% [2]. For semiconductor suppliers this is order visibility measured in years; for utilities it is a demand shock that the grid was not built for.
How much AI capital spending is happening in 2026
The second-quarter reports, all released between July 22 and July 30, 2026, give a consistent picture: spending is rising faster than revenue, and management teams are raising rather than trimming their plans [1][2][3][4].
| Company | Q2 2026 capex | Revenue growth | Cloud or AI segment growth | 2026 capex outlook |
|---|---|---|---|---|
| Alphabet | $44.9 billion | +24% to $119.8 billion | Google Cloud +82% to $24.8 billion | $195 to $205 billion (raised) |
| Amazon | $173.0 billion trailing 12 months | +20% to $200.6 billion | AWS +37% to $42.2 billion | Not stated in release |
| Meta | $31.1 billion | +28% to $60.8 billion | n/a | $130 to $145 billion (floor raised) |
| Microsoft | Not stated in release | +18% to $90.0 billion | Azure +43% | Not stated in release |
Sources: company earnings releases [1][2][3][4] and Alphabet's July 22 earnings call as reported by W.Media [5].
Alphabet's chief financial officer said the higher range reflects an acceleration in the delivery of capacity to meet demand, with about 60% of infrastructure spending going to servers and 40% to data centers and networking, and that Google Cloud's backlog stood at $514 billion at the end of June [5]. Amazon's operating cash flow for the trailing twelve months was $161.4 billion, up 33%, but free cash flow turned negative at minus $7.6 billion because of the capital program [2]. Meta's operating margin fell to 31% from 43% a year earlier as costs rose 55%, and its free cash flow for the quarter was $784 million [3]. Microsoft (MSFT) reported Azure and other cloud services growth of 43% and said Azure revenue passed $100 billion for the fiscal year [4].
What the spending means for semiconductor stocks
The chip industry is the first recipient of these budgets. If Alphabet's split holds across the group, roughly 60 cents of every capital dollar goes to servers, which means processors, memory, networking silicon and the equipment used to make them [5]. Alphabet alone will spend about $115 billion to $125 billion in the second half of 2026 to reach its range, more than it spent in all of the first half [1][5].
Visibility versus valuation
Order visibility explains why chip and memory stocks led the market in the first half. It does not settle the valuation question. DataPorium's sector P/E series for Nasdaq-listed companies showed a trailing multiple of 47.5 for Technology on July 7, 2026, against 20.5 for Financial Services and 17.1 for Energy [6]. A trailing multiple in the high 40s prices in years of growth. The customer base is also concentrated: four buyers account for a large share of AI accelerator demand, and every one of them said it intends to keep spending only as long as demand for its own services justifies it. Investors may consider that the semiconductor cycle has historically turned when customers finished a build-out, not when demand for the end product stopped growing. Sector multiples can be tracked daily on DataPorium's stock market page and individual suppliers ranked in the stock screener [6].
What the spending means for utility stocks
The other 40% of the capital budget, data centers and networking, is where utilities enter the picture [5]. Every data center shell needs a grid connection, and the largest new sites request hundreds of megawatts each. Utilities with spare generation, transmission capacity or the ability to sign long-term power contracts have become part of the AI trade. The Utilities Select Sector SPDR Fund (XLU) closed at $44.11 on August 3, 2026, up 2.2% from $43.18 at the end of 2025, after reaching $44.77 on June 30 [6]. That is a modest gain for a sector that is supposed to be a beneficiary, and it reflects the offset from higher long-term interest rates, which raise the discount rate on regulated utility earnings.
The utility exposure is also different in kind from the chip exposure. A regulated utility earns a return on the capital it invests in poles, wires and plants, subject to approval by state regulators. Its upside from a data center is steady rate-base growth, not a multiple of the customer's spending. Independent power producers with unregulated nuclear or gas capacity have more direct pricing power, and their stocks have behaved more like technology names. Points investors may consider:
- Alphabet's and Meta's quarterly figures plus Amazon's twelve-month average add up to more than $100 billion of capital spending per quarter before counting Microsoft [1][2][3].
- Free cash flow is now the binding constraint: Amazon's is negative over twelve months and Meta's was under $1 billion in the quarter [2][3].
- Chip suppliers get the first and largest share of the spending; utilities get a slower, regulated share [5].
- A trailing P/E near 47 for technology leaves little margin if any large buyer pauses [6].
The counterpoint: can the spending pay for itself
The fair objection is that revenue from AI services must eventually cover the depreciation of these assets. The second-quarter results give some support to the bulls. Google Cloud grew 82% and its backlog reached $514 billion [1][5]. AWS grew 37%, its fastest rate in eighteen quarters [2]. Azure grew 43% [4]. Those growth rates are consistent with customers paying for capacity as fast as it is built, which is the condition under which capital spending creates rather than destroys value. The risk is timing: servers depreciate over a few years, and if demand growth slows before the assets are paid for, margins at the platforms fall first and orders to suppliers fall second. Meta's margin compression is an early example of what that looks like in the income statement [3].
Record AI capital spending in 2026 gives chip suppliers years of visible demand and utilities a slower regulated tailwind, but the whole chain now depends on cloud revenue growing fast enough to pay for assets that are being built ahead of it.
Key takeaways
- Alphabet spent $44.9 billion on capex in Q2 2026 and $80.6 billion in the first half, and raised its 2026 range to $195 to $205 billion [1][5].
- Amazon's trailing twelve-month capex reached $173.0 billion, up 64%, and its free cash flow turned negative [2].
- Meta guided to $130 to $145 billion of 2026 capex while its operating margin fell to 31% from 43% [3].
- Cloud revenue is growing fast: Google Cloud +82%, Azure +43%, AWS +37% [1][2][4].
- Technology trades at a trailing P/E of 47.5 while XLU is up only 2.2% year to date as of August 3, 2026 [6].
Frequently asked questions
How much are big tech companies spending on AI in 2026?
Alphabet guided to $195 to $205 billion of 2026 capital expenditures and Meta to $130 to $145 billion, while Amazon's trailing twelve-month capex reached $173.0 billion as of June 30, 2026 [1][2][3][5].
Which stocks benefit most from AI capital spending?
Roughly 60% of Alphabet's infrastructure spending goes to servers, which benefits chip, memory and networking suppliers first; the remaining 40% goes to data centers and networking, which supports power producers and regulated utilities over a longer period [5].
Is AI capex hurting big tech free cash flow?
Yes. Amazon reported trailing twelve-month free cash flow of minus $7.6 billion and Meta reported quarterly free cash flow of $784 million, while Meta's operating margin fell to 31% from 43% [2][3].
Why have utility stocks not risen more with data center demand?
XLU is up 2.2% in 2026 through August 3 because higher long-term interest rates offset the demand benefit, and regulated utilities earn a fixed return on new investment rather than a share of customer spending [6].
Sources & References
- [1] Alphabet Announces Second Quarter 2026 Results (SEC Form 8-K exhibit, July 22, 2026)
- [2] Amazon.com Announces Second Quarter Results (July 30, 2026)
- [3] Meta Reports Second Quarter 2026 Results (July 29, 2026)
- [4] Microsoft Cloud and AI strength fuels fourth quarter results (July 29, 2026)
- [5] W.Media: AI infrastructure demand pushes Alphabet's 2026 capex guidance to US$205 billion (July 23, 2026)
- [6] DataPorium Stock Market Analytics
