In January, when the star of DeepSeek, the Chinese startup low cost, industry observers have begun to wonder how much sense all those billions spent by the Big Tech USA, if the same results could be achieved with four pennies. The actions of the Magnificent Seven started to fall and many had thought that in the following months the companies would change their investment policies, reducing them.
Instead, Big Tech they never fail to amaze once again and are now attempting what analysts call the mother of all revolutions. Microsoft and other software giants are now investing resources also in physical goods, mainly for the chip and data center used for the development of theartificial intelligence, even at the cost of consequences on profitability and high valuations, Reuters reports.
Alphabet, Amazon.com, Meta and Microsoft: Invested capital will be $2025 trillion in 1.000
For now, their core businesses are so profitable that the CEOs themselves are investing in this sector: A, the owner of Google, on the occasion of the publication of the quarterly data at the end of April, announced the third program of buyback of own shares from 70 billion dollars and increased the dividend annual 5%, while maintaining a plan of capital expenditure from 75 billion dollars by 2025.
Others have also joined the buying spree: Alphabet, Amazon.com, Meta Piattaform and Microsoft are on track to reach about $320 billion in capital investments this year, or 13 times more than ten years ago. The quartet's aggregate invested capital will amount to 1.000 billions of dollars in the 2025, which also represents a 13-fold increase in 10 years, according to Visible Alpha data reported by Reuters. This figure summarizes the cost of all the assets a company uses to run its business, or its total financing.
How Much Capital to Invest for $1 in Revenue? The Numbers Have Exploded
Meanwhile the amount of money necessary to generate 1 dollar turnover. In 2015, for example, capital expenditures of Meta were equal to 14% of its sales. This year, the percentage is expected to double, reaching approximately a third of the turnover, roughly the same figure as chipmaker Taiwan Semiconductor Manufacturing.
In Microsoft, the shift is even more dramatic. For much of its existence, the company behind the Windows operating system has been characterized by high profits and low initial investment: capital expenditures amounted to about 10% of sales through 2021, just before ChatGPT sparked an AI explosion. Microsoft's capital expenditures that year were nearly $80 billion, according to Visible Alpha, with a 80% return on invested capital, a financial measure that is also highly appreciated by investors, including Warren Buffett. Now the CEO Satya Nadella increased the capital investments at almost a quarter of turnover, according to Wall Street forecasts for the calendar year. It is close to a third, including the amount invested in financial leasing. All this spending is driving the Microsoft's invested capital at one level Without precedents. According to analysts, revenue is expected to be around $2025 billion for 290, with an additional $110 billion in after-tax operating profit.
Watch your earnings and returns: timing will be key
With Microsoft now on track for more than $500 billion in investment over five years, the revenues futures will have to be truly gigantic to justify the expense, analysts say. It will be a long climb, he said. Nadella in January, when its AI business, which includes parts of Azure and 365 Copilot's machine learning services, generated just $13 billion in annual revenue. timing This will be a major factor: it will take a while to reap the benefits of capital investments, and there is also the risk that the enthusiasm will run out, leaving behind a pile of expenses.
It's an opportunity Big Tech CEOs may have to seize. "Part of the capital intensity is an existential reality: These big companies have to invest or they risk not growing," says Tony Kim, CEO of BlackRock and heads the asset manager's core equity technology group.
Alphabet, Amazon, Meta and Microsoft, which together account for more than $8.000 trillion in market capitalization, trade at an average of 21 times 2026 projected earnings, according to Visible Alpha, a nearly 20% premium to the broader market. Technology may maintain a prominent position in many investment portfolios on a relative basis, but the gap could easily close.
