The Rundown - Deep Dive: Big Tech’s $325 Billion CapEx Spending Spree

Episode Date: February 9, 2025

Big Tech is going all-in on AI, with a projected $325 billion in capital expenditures for 2025—but is it a smart bet? In this episode, we break down what CapEx is, why companies like Amazon, Microsoft, Google, and Meta are spending massive sums to build AI infrastructure, and how Wall Street is reacting. While Nvidia remains the biggest winner of this spending spree, open-source AI models like DeepSeek could disrupt the market. Plus, we analyze why Meta is thriving while other tech giants face growing investor skepticism—tune in for the full breakdown!The content of the video is for general and informational purposes only. All views presented in this show reflect the opinions of the guest and the host. You should not take a mention of any asset, be it cryptocurrency or a publicly traded security as a recommendation to buy, sell or hold that cryptocurrency or security. Guests and hosts are not affiliated with or endorsed by Public Holdings or its subsidiaries. You should make your own financial and investment decisions or consult respective professionals. Full disclosures are in the channel description. Learn more at Public.com/disclosures.Past performance is not a guarantee of future results. There is a possibility of loss with any investment. Historical or hypothetical performance results, if mentioned, are presented for illustrative purposes only. Do not infer or assume that any securities, sectors or markets described in the videos were or will be profitable. Any statements of future expectations and other forward-looking statements are strictly based on the current views, opinion, or assumptions of the person presenting them, and should not be taken as an indicator of performance nor should be relied upon as an investment advice.

Welcome back to the rundown for another weekend deep dive. In today's episode, we are talking about CAPX. It's a word that you've probably been hearing a lot. Big tech companies just told investors how much they expect to spend on CAPX this year, and the numbers are shocking. I'm talking hundreds of billions of dollars. So in today's show, I'll explain what CAPX even means and what it has to do with AI. We also dive into the CAPX numbers from these big tech companies and tell you how the markets are reacting.

Honestly, it's been kind of a mixed bag. There's been some winners and losers. We got a great one for you today. Let's dive in. Let's first start with defining what CAPEX actually is. It's a fun word to say, but what does it actually mean? Well, CAPX stands for capital expenditure, and it's the money that companies use to acquire, upgrade, and maintain physical assets such as properties, buildings, or equipment.

In the case of tech companies, that often means data centers, servers, and AI chip. And over the past couple of years, the CAPX spending from big tech companies has exploded because of AI. Specifically, companies like Microsoft, Google, Amazon, and Meta, they're all rushing to build out AI infrastructure to win the AI race. I'm talking hundreds of billions of dollars to buy AI chips, to buy land, to build massive data centers, and acquire energy to power those data centers. And based on these companies' latest earnings reports,

these companies have no plans of slowing down spending. In fact, they're doubling down. So let's dive into the numbers and take a closer look. Now, at this point, all the major tech companies have reported earnings, Google, Microsoft, Amazon, and Meta. And from these earnings, we learned how much these companies spent on CapEx last year and more importantly, how much they expect to spend on CapEx this upcoming year. And I got to say these numbers are pretty shocking. At the high level, Microsoft, Amazon, Google, and Meta spent $246 billion in CapEx in 2024, which is up 62% from 2023.

And these numbers are going way up in 2025. So let's break it down for each company, starting with Amazon. In 2025, Amazon is planning to spend $105 billion in capital expenditures, primarily to bolster their AI capabilities within AWS, Amazon Web Services, their cloud business. That's a 35% increase from 2024 and more than double what they spend in 2023. Similar story for Microsoft, their CAPEX is expected to jump to $80 billion this calendar year, which is more than 80% from 2024. Microsoft has a ton of enterprise clients using Azure Cloud,

and Microsoft has been introducing AI capabilities through co-pilot, and they really think this is a big opportunity for them. Shifting over to Google, they expect to spend $75 billion in CAPEX this year. That's a 42% increase from last year. And similar to Microsoft and Amazon, Google is working to boost their AI capabilities for Google Cloud, but they're also trying to incorporate AI into their search results as well. I feel like their AI responses in search is starting to get really good. On top of that, Google has their own frontier AI models like Gemini.

In fact, Google just released Gemini 2.0 to the public. this past week, and it's gotten some pretty good reviews so far. And finally, we have Meta. They plan to spend about $65 billion in Cappex this year. That's up 75% from 2024. You know, Meta is focusing on building out data centers and other infrastructure to support their AI initiatives. Mark Zuckerberg announced that they were building a massive data center in Louisiana.

That's the size of Manhattan. And meta's goals for AI is to get it in the hands of billions of people. So they need to have a lot of data center capacity for all that computation. Now, one company that I haven't mentioned yet is Apple. They also reported earnings recently, and they didn't really announce any big plans to spend on AI development. I guess maybe that's why Apple intelligence is so bad. So yeah, if you add up all the CAPX from the companies that I just mentioned, that's more

than $325 billion in projected CAPX spending in 2025. You know, there was some expectations that after the Chinese AI app deep seek shocked the tech world with their R1 model that seemed to be just as good as OpenAI's best model, but cost only $6 million to train, that these big tech companies, might slow down spending on AI. But these big tech giants don't see it that way. In fact, they think that the cost of AI coming down is going to increase demand.

These companies are already struggling to meet the AI demand from their customers, which is why they're rushing to build more data centers to increase their capacity. So they're not worried about the lowering cost of AI. All of them see AI as this huge opportunity. In fact, Amazon CEO Andy Jassy called AI a once-in-a-lifetime opportunity,

even though all this spending hasn't led to meaningfully more profits or revenues just yet. And that's what's the thing. the market reaction to all this spending has been interesting. Investors are rewarding some stocks like meta, but they're worried about others like Amazon, Google, and Microsoft. So let's talk more about the market reaction and some of the winners and losers. You know who's loving all this Kappex spending is Nvidia and their shareholders. They've already been the biggest winners from the AI boom over the last couple of years. Invidia stock has gotten up over 700% since the start of 2023,

thanks to a huge demand for their AI chips that are needed to train AI models. The data centers that meta, Amazon, Google, and Microsoft our building are powered by these Nvidia AI chip, or at least partially powered by these chips. Invidia's H-100 chip is in such huge demand that Nvidia can't make enough of them. And that's why they're able to charge a high price and make big margins on them. There seems to be heavy demand for their upcoming B-100 chips. Simply put, Nvidia still makes the best AI chips. And the demand for these chips has pushed Nvidia's market cap to over $3 trillion.

At one point, they were the most valuable company in the world. But, Nvidia's dominance isn't bulletproof. In fact, a growing number of companies are working on custom AI chips hoping to reduce their reliance on Nvidia. And then you have the whole deep seek thing, which is slashing computing costs for AI models. If AI models become significantly more efficient, companies may no longer need the massive amount of GPU clusters from Nvidia to stay competitive. So there are some huge risk from Nvidia moving forward. But for now, Nvidia is still king. And all the CAPX announcement from these big tech companies, I'm sure a lot of that money is going to be going towards Nvidia chips.

So we know that Nvidia has been a winner. But another winner from the big KAPEX spending are energy companies that are going to provide power to AI data centers. Companies like Constellation Energy and Vistra Energy, they're not really household names, but they were some of the best performing stocks in the S&P 500 last year. Because, you know, no matter who is supplying their chips for these data centers, power is still going to be needed. So I can see why investors are jumping into this sector. But I think the most interesting reaction right now has been the stocks of these KAPX spenders themselves. The stocks of Microsoft, Google, and Amazon all dropped after they reported earnings. because of concerns around heavy AI spending.

These companies haven't shown that they can monetize their AI effectively yet. And I think this could be a sign that investors might be worried that these companies won't ever see a return on all the CAPEX investment. Like sure, people are using Microsoft co-pilot and Google Gemini. In fact, I actually pay Google 20 bucks a month to get access to Gemini Pro. But that revenue still isn't a meaningful part of their business yet. The exception to all of this seems to be meta. Their stock has been on a hot streak recently.

Meta's stock is up 22% year. year to date, and they just ended the week on a streak of 15 straight days of gain. And there's a reason for that. It's because meta's AI investment is already starting to pay off. While other big tech giants are hoping their AI bets will pay off eventually, meta is already printing money from AI powered ad targeting. On top of that, meta is going to benefit from AI getting cheaper. Lower cost of AI will make it cheaper for them to serve targeted ads. Not to mention meta has their own leading open source AI model called Lama, and they also have more than 3 billion people use their services every day so they can put their AI tools in front of billions of people to use.

So investors see a ton of upside for meta and their stock price has been rewarded because of it. So there you have it. A sneak peek of what to expect from big tech this year. It's pretty clear that these companies aren't backing away from their big bet on AI, even if it results in a hit to their profits in the short term. And while investors have been okay with all the cap-back spending over the past couple of years, there seems to be a little bit of hesitation creeping in. To me, it's pretty simple. None of these big tech giants want to be the next blockbuster. So they're willing to spend as much money as needed to make sure they don't miss the AI boat. We'll just have to see how long investors are going to be cool with that. Well, all right, guys, that's it for today's

weekend. Deep dive. Hope you guys enjoyed today's show. By the way, we actually record these weekend episodes with video. So if you want to see relevant charts and graphs related to this episode, watch the video on YouTube or Spotify. And if you have 10 extra seconds while you're there, subscribe to the podcast and give us a five-star rating. Thank you guys so much for watching. Shout out to Mike in public for all the help behind the scenes and we'll see you guys back here on Monday