A recent asset allocation report from Syz Bank in Switzerland indicates that Microsoft, Alphabet, Amazon, and Meta's combined capital expenditures in the third quarter reached approximately $202 billion, a 22% increase from $165 billion in the second quarter, roughly double the amount in the same period last year. The four companies' cumulative capital expenditures for the first three quarters of 2026 are estimated at around $500 billion, and all have indicated further investment plans for 2027.
AI demand remains strong, with Microsoft Azure revenue growing 48% year-over-year in the third quarter, Google Cloud revenue more than doubling, and Amazon AWS revenue growing 39%. However, this rapid expansion of capital expenditures is changing market assessment standards. The report points out that Meta and Alphabet both experienced negative free cash flow in the third quarter, and Meta also raised approximately $37.5 billion through the issuance of common stock and convertible preferred stock, with its five-year credit default swap (CDS) spread reaching a record high.
Syz believes that AI infrastructure construction is entering a phase of higher capital intensity and greater differentiation among companies. Revenue growth and order backlogs continue to support investment demand, but whether operating cash flow can cover the ever-expanding capital expenditures, and the extent to which companies rely on debt and equity financing, will be key variables determining the pace of AI investment expansion. The credit market will also play a greater role in pricing financing costs and risks.
