The AI investment frenzy still hasn't cooled down! Amazon and Microsoft earnings reports signal strong demand for computing power

The Zhitong Finance App learned that the aggressive AI investment plans recently announced by Amazon (AMZN.US), Microsoft (MSFT.US), and Google's parent company Alphabet (GOOGL.US) provide the latest evidence that demand for chips and related devices will remain strong, giving hardware suppliers that have continued to be under pressure recently a chance to take a break.

Amazon raised its capital expenditure forecast for the full year to $220 billion on Thursday, compared to $200 billion previously. CEO Andy Jassi said most of the spending will go to the field of artificial intelligence.

The above outlook is accompanied by the intensive release of financial reports from the world's largest cloud computing service providers. The data shows that the ambitions of these tech giants in building AI infrastructure have not diminished at all.

Microsoft confirmed its capital expenditure guidelines after excluding the impact of accounting changes; Google's parent company Alphabet raised spending expectations; Meta Platforms also raised the lower edge of capital expenditure guidelines.

This is certainly beneficial for chip makers, network equipment vendors, and other data center technology providers. Recent market concerns about a slowdown in spending have put pressure on these companies' stock prices.

Industry research analysts Kunjan Sobhani and Oscar Hernandez Tejada pointed out that the outlook for the industry in the coming year will be clear. They stated in the report: “As most large hyperscale companies raise or confirm capital expenditure plans in their financial reports, the possibility that computing and network chip makers' 2026-2027 performance expectations will exceed expectations is increasing.”

Amazon's earnings report has been recognized by investors, and its cloud computing revenue has accelerated for the fifth consecutive quarter, sending a clear signal that the company's huge investment is being transformed into actual results.

Microsoft also received enthusiastic responses from the market. After announcing the fastest cloud business growth rate in four years on Thursday, the company's market capitalization soared by nearly 500 billion US dollars, the highest single-day increase in the market value of a single company in history.

In contrast, Meta and Alphabet are not equally favored by investors. The market has doubts about whether the two companies' expenses will bring clear returns.

The shares of Facebook and Instagram parent company Meta fell nearly 8% on Thursday due to weak sales guidelines while promising future spending close to $700 billion.

Wells Fargo analyst Ken Garelski said that now “investing heavily in AI” is no longer enough to impress the market, and investors are increasingly concerned about return on investment. “After 12 to 18 months of regression, the market is concerned about how much you can spend and how much computing power you can go online. Now that the trend has changed, the focus has rightly shifted to return on investment.”

Google fell 7.1% on July 23. The day before, the company expected capital expenditure for the full year of 2026 to reach 1950 billion to 205 billion US dollars, higher than the previous forecast of 190 billion US dollars.

In any case, these huge expenses are expected to benefit suppliers, which have been in the haze of the near future.

The shares of memory chip giants Samsung Electronics and SK Hynix plummeted earlier this week, then rebounded under the latest spending signals. Companies such as CoreWeave (CRWV.US), Nebius Group (NBIS.US), Intel (INTC.US), and Nvidia (NVDA.US) have also rebounded from similar declines.

According to people familiar with the matter, many of these companies have been listed in the public holdings of Situational Awareness, a hedge fund owned by Leopold Aschenbrenner. The fund has already reduced some of its stock positions after suffering losses in the recent sharp decline in the AI sector. This may be one of the reasons for the decline in some individual stocks.

Analyst Sobhani pointed out that the key point now is whether chip makers and other equipment vendors can continue their rebound. He cautioned that data center companies have hinted that they may slow down spending if needed, so excess revenue is not a foregone conclusion. “For semiconductor stocks, this should help stabilize market sentiment, but it may not be enough to reverse the pattern and drive a sharp rise in stock prices.” he said.