While high capex is often seen as a negative, for giants like Alphabet and Microsoft, it functions as a powerful moat in the AI race. The sheer scale of spending—tens of billions annually—is something most companies cannot afford, effectively limiting the field of viable competitors.

Tech giants like Google and Microsoft are spending billions on AI not just for ROI, but because failing to do so means being locked out of future leadership. The motivation is to maintain their 'Mag 7' status, which is an existential necessity rather than a purely economic calculation.

Google plans to spend up to $185 billion on CapEx in 2026, more than its lifetime spend up to 2021. This isn't just about building infrastructure; it's a strategic message to the market and potential IPO candidates like OpenAI and Anthropic about the immense, and growing, cost to compete at the frontier of AI.

In the AI arms race, a $10 billion investment from a trillion-dollar company is seen as table stakes. This sum is framed as the cost to secure a handful of top engineers, highlighting the massive decoupling of capital from traditional value perception in the tech industry.

Major tech companies view the AI race as a life-or-death struggle. This 'existential crisis' mindset explains their willingness to spend astronomical sums on infrastructure, prioritizing survival over short-term profitability. Their spending is a defensive moat-building exercise, not just a rational pursuit of new revenue.

By nearly doubling its capital expenditure, Google is signaling to the market, especially to potential IPO candidates like OpenAI and Anthropic, the immense financial scale required to compete at the AI frontier. This move acts as a strategic deterrent and raises the capital barrier for the entire industry.

The largest tech firms are spending hundreds of billions on AI data centers. This massive, privately-funded buildout means startups can leverage this foundation without bearing the capital cost or risk of overbuild, unlike the dot-com era's broadband glut.

During a technology shift like AI, if the trend proves real, companies that failed to invest risk being permanently left behind. This forces giants like Microsoft and Meta into unprecedented infrastructure spending as a defensive necessity.

Unlike past tech booms funded by venture capital, the next wave of AI investment will come from hyperscalers like Google and Meta leveraging their pristine balance sheets to take on massive corporate debt. Their capacity to raise capital this way dwarfs the entire VC ecosystem, enabling unprecedented spending.