The major U.S. technology companies that once enjoyed near-universal investor confidence are now facing a sharper reality check. Alphabet, Microsoft, Amazon and Meta have all signaled that 2026 will be a year of massive capital spending, largely aimed at building and scaling artificial intelligence.
But the spending surge comes at a time when returns have not kept pace with the rising outlays. With valuations already stretched, investors are growing less tolerant of what they see as speculative, long-term bets without clear evidence of profit growth or return on invested capital.
“Investors right now are not forgiving about large investments without clear signal on return on invested capital,” analysts at Morgan Stanley said.
Below is a snapshot of how the major players performed in the December quarter—and why the market is increasingly splitting the AI winners from the spenders.
Capital Spending: AI Investment Soars
Amazon, Alphabet, Meta and Microsoft are leading a spending boom that could reshape the industry—if it pays off.
The group is expected to collectively spend more than $630 billion on AI this year, primarily on data centers, chips, and cloud infrastructure.
- Amazon: The biggest spender in the group, reserving $200 billion in planned outlays.
- Alphabet: Not far behind, with up to $185 billion in planned spending.
- Meta: Projected to spend as much as $135 billion.
The scale of this investment is unprecedented. It reflects the belief that AI will be the defining platform of the next decade—but also raises questions about whether these companies can generate enough return to justify the spending.
Cloud Revenue: AI Demand Boosts Growth, But Gaps Remain
AI is lifting cloud revenue, but the winners are not evenly distributed.
In the latest quarter, cloud growth varied significantly among the top providers:
- Google Cloud grew 48%, the fastest of the three major U.S. cloud providers.
Strong adoption of Google’s Gemini AI model has led some analysts to argue that Alphabet is taking the lead in the AI race. - Microsoft Azure grew 39%, a strong showing driven by enterprise demand and AI integration.
- Amazon Web Services (AWS) grew 24%, still the largest cloud platform but showing slower growth than its peers.
This divergence suggests that AI is becoming a key competitive differentiator in cloud services, and not all providers are benefiting equally.
Profit Trends: AI Spending Hits Some, Rewards Others
Rising costs are squeezing profit for some companies, while others still show strong earnings momentum.
In the December quarter, increased expenses weighed heavily on profit growth at Amazon and Meta, even as their AI investments continue to expand.
By contrast, Microsoft reported its strongest profit growth in two years—suggesting that its AI strategy is starting to pay off more visibly.
The uneven profit performance highlights a critical investor concern: AI spending is no longer enough—returns must follow.
Market Value: Alphabet Surges Ahead
Investor optimism has been strongest for Alphabet, driven by Gemini and strategic partnerships.
Alphabet’s stock has outperformed its peers in recent months, buoyed by:
- the success of its Gemini AI model
- its high-profile deal to power Apple’s revamped Siri
- renewed confidence in Google’s AI leadership
Alphabet’s market value recently crossed the $4 trillion threshold, underscoring how AI expectations continue to drive valuations—despite growing scrutiny over spending.
The Bottom Line
The AI era is entering a new phase. The market is no longer rewarding AI investment as a broad theme. Instead, investors are separating companies that can generate real returns from those still building the foundation.
As spending rises into the hundreds of billions, the pressure is on for big tech to prove that the AI bet will pay off—not just in innovation, but in profits.