Hyperscalers Plan Huge Increase in Capex for AI by 2025

Leading technology companies known as hyperscalers, such as Alphabet, Microsoft, Amazon, and Meta, have recently shared their financial results for the third quarter. Along with these results, they provided updates regarding their capital expenditure (capex) plans, particularly in light of the ongoing boom in artificial intelligence (AI). The projected figures and growth rates are quite impressive.

According to Brian Nowak, an analyst at Morgan Stanley, the capex of these hyperscalers is expected to surpass $300 billion by 2025, which represents a 25% increase from 2024 and is nearly double the spending level of 2023.

This increase in spending is significant enough for analysts to adjust their forecasts. Nowak has increased their 2025 capex estimates by 9%. The largest expenditures are anticipated from Amazon and Microsoft, with predicted spending of $96.4 billion and $89.9 billion, respectively.

Nowak noted, "Overall, we now expect AMZN/GOOGL/META/MSFT to spend around $300 billion to $335 billion in 2025 and 2026 as they continue to invest in opportunities related to generative AI and language models. These increasing capex figures underlie the importance of ongoing transparency regarding new adoptions, customer engagement, and the revenue opportunities that these major companies are pursuing and investing in."

The biggest winner from this surge in capital expenditures is expected to be NVIDIA, a company that specializes in high-performance AI chips that are essential for supporting the substantial new infrastructure created by these AI investments.

Vivek Arya, an analyst at Bank of America Securities, estimates that NVIDIA will capture over 75% of the AI accelerator market share from now until 2027. In comparison, other competitors like Advanced Micro Devices Inc and Broadcom Inc are forecasted to achieve only mid-single-digit market shares.

Arya commented, "We anticipate that the AI accelerator market will expand to $280 billion by 2027, eventually growing to over $400 billion, up from approximately $45 billion in 2023."

AI, Capex, NVIDIA