Citi Sees Alphabet, Meta, Amazon Capex Hitting $801B in 2027

Citi analysts project that combined capital expenditure of Alphabet (GOOGL), Meta (META), and Amazon (AMZN) will reach $801 billion in 2027, signaling continued massive investment in AI infrastructure.

Details of the Forecast

According to a Citi research note, the combined capex of the three tech giants is expected to exceed $800 billion by 2027, with a warning that this level of spending will result in negative free cash flow for Alphabet, Meta, and Amazon in both 2027 and 2028.

Analyst Rationale

Analysts believe the race to build AI infrastructure requires enormous investments in data centers and specialized chips, pressuring free cash flows. However, they consider these investments necessary to maintain competitiveness in the growing AI market.

Context

The forecast comes as tech giants compete for AI dominance, with Amazon, Meta, and Alphabet announcing ambitious plans to increase capital spending. In contrast, some analysts warn that returns on these investments may take years to materialize.

What to Make of It

Citi's forecast suggests the three companies are willing to sacrifice near-term free cash flow for long-term AI growth opportunities. Investors should monitor these companies' ability to generate returns on their massive investments.