Investors should brace for eye-popping capital expenditures numbers from major cloud service providers like Amazon (AMZN) and Microsoft (MSFT) when they report earnings this week.
In a new note, JPMorgan strategist Samik Chatterjee offered some fresh estimates on accelerating AI infrastructure spending.
“Data center capex among the top 4 U.S. cloud service providers continues to trend higher for 2026 following our last update, … driving another upward revision to the outlook — from +52% to +63% growth in 2026 — with robust double-digit growth increases evident across all U.S. hyperscalers,” Chatterjee wrote.
“On a dollar basis, the growth implies a significant increase of more than +$200 billion of additional data center capex in 2026, the largest annual step-up to date, surpassing the record set in 2025,” the strategist added. “Importantly, we are establishing our forecast for data center capex from Top 4 U.S. cloud service providers in 2027 to expand at a robust pace of 40% — which, although implying a moderation in the growth rate, translates into a new record of $210 billion plus increase in spending, already surpassing the robust $200 billion plus annual step-up we are forecasting in 2026.”
The backdrop: The demand for all things AI sets the stage for hyperscalers to share much higher spending plans this week and even perhaps well into year-end.
Taiwan Semiconductor Manufacturing Company (TSM) delivered a strong start to the year despite war-related uncertainty. Its first quarter revenue surged 35% year over year to a record 1.134 trillion New Taiwan dollars (about $35.6 billion). This represented the first time the foundry giant’s quarterly sales had crossed the trillion-dollar threshold in local currency.
Taiwan Semiconductor’s results significantly exceeded the high end of its previous guidance, and sales in March jumped 45% to roughly $13 billion, hinting that the AI supercycle is entering a higher gear.
Intel’s (INTC) earnings last week were good as well, with CEO Lip-Bu Tan signaling strength in AI chip demand.
And Elon Musk’s Tesla (TSLA) is all in on building new production lines to support AI-powered robots and scaling up a new AI chip plant called Terafab. The company raised its capex plans last week on its earnings day to $25 billion for this year from $20 billion previously. It doled out $8.5 billion in capex in 2025.
The bottom line: The Street didn’t like that Elon Musk hiked Tesla’s capex guidance by $5 billion on his earnings call last week, seemingly out of the blue. Investors punished the stock the morning after earnings, and it has been range-bound since.
Leave a Reply