Big Tech Is Spending More Than Ever on AI and It’s Still Not Enough

Meta, Alphabet, Microsoft and Amazon will increase spending in 2026; ‘Are we in a bubble?’

Silicon Valley’s biggest companies are already planning to pour $400 billion into artificial intelligence efforts this year. They all say it’s nowhere near enough.

Meta Platforms says it is still running up against capacity constraints as it tries to train new AI models and power its existing products at the same time. Microsoft says it is seeing so much customer demand for its data-center-driven services that it plans to double its data-center footprint in the next two years. And Amazon.com says it is racing to bring more cloud capacity online as soon as it can.

“We’ve been short [on computing power] now for many quarters. I thought we were going to catch up. We are not. Demand is increasing,” said Amy Hood , Microsoft’s chief financial officer. “When you see these kinds of demand signals and we know we’re behind, we do need to spend.”

Meta, Alphabet , Microsoft and Amazon have all told investors over the past 48 hours that they will increase spending in 2026. Investors gave their blessing to plans laid out by Google and Amazon, with some worrying about those set forth by Meta and Microsoft.

Meta shares closed down 11% on Thursday, and Microsoft’s shares fell by nearly 3%. Google and Amazon shares rose by roughly 6% and 10%, respectively, in after-hours trading.

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The mixed signals from investors are rooted in uncertainty about where the outsize spending will ultimately lead. The companies and a variety of AI boosters say the investments are necessary for machine-learning systems to reach artificial general intelligence, or AGI, a state in which they are smarter than humans.

“Whoever gets to AGI first will have an incredible competitor advantage over everybody else, and it’s that fear of missing out that all these players are suffering from,” said Youssef Squali , lead internet analyst at Truist Securities. “It’s the right strategy. The greater risk is to underspend and to be left with a competitive disadvantage.”

But skeptics have cast doubt on whether spending billions on large-language models, the most popular AI systems, will ever lead to that goal. They also point to the small number of paying users for existing technology and the need for years of training before many workers around the world will be able to effectively put it to use .

Investors have made it clear they will show patience in some scenarios, and in others they won’t.

Analysts peppered executives with pointed questions on the investor calls that took place after the earnings results were announced. On Microsoft’s call, one analyst asked the question seemingly on everyone’s mind: “Are we in a bubble?” On Google parent Alphabet’s call, another asked: “What early signs are you seeing that gives you confidence that the spending is really driving better returns longer term?”

Google, which said its capital expenditures for the full year would jump from $85 billion to $91 billion to $93 billion , said the investments were already paying off.

“We already are generating billions of dollars from AI in the quarter. But then across the board, we have a rigorous framework and approach by which we evaluate these long-term investments,” said Anat Ashkenazi , Google’s chief financial officer.

Microsoft said it would be operating with not enough capacity to power both its current businesses and AI research to the extent needed through at least the first half of next year, and that its cloud computing business, Azure, is bearing “most of the revenue impact.”

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Amazon told investors that it is moving as quickly as it can to bring new capacity online because it can make money off those investments immediately.

“You’re going to see us continue to be very aggressive in investing capacity because we see the demand,” said Amazon Chief Executive Andy Jassy . “As fast as we’re adding capacity right now, we’re monetizing it.”

Meta didn’t offer fresh details about AI model release or product timelines, or when investors would more broadly see returns on their investments, spooking some. In after-hours trading Wednesday, after its earnings call, Meta shares dropped more than 7%.

If the company is wrong about how much money it is spending to reach AGI, it will simply pivot, Meta Chief Executive Mark Zuckerberg told investors on its call Wednesday.

“I think it’s the right strategy to aggressively front load building capacity. That way, we’re prepared for the most optimistic case,” he said. “In the worst case, we would just slow building new infrastructure for some period while we grow into what we build.”

Zuckerberg also said that Meta’s current ads business and platforms are running in a “compute-starved state” while the company gives more resources to AI research and development efforts instead of shoring up existing operations.

Its capital expenditures—which already nearly doubled from last year to $72 billion this year—will grow “notably larger” in 2026, Meta CFO Susan Li said, without providing specific numbers.

Apple said on its earnings call that it is also increasing investments in artificial intelligence. But its total spending still pales in comparison to the amount the other tech giants are laying out.

Write to Meghan Bobrowsky at meghan.bobrowsky@wsj.com