Big Tech AI capex set to hit $168 billion in Q2 as Meta weighs renting out spare capacity

SpaceX xAI and Anthropic signed $1.25 billion monthly compute deal before IPO

Combined capital spending by Google, Microsoft, Amazon, and Meta surged 74% year over year to an estimated $168 billion in the quarter ending June, according to The Wall Street Journal, citing Visible Alpha consensus estimates. The spending has crimped free cash flow and weighed on stock prices; only Alphabet has outperformed the S&P 500 this year among the four.

Meta has been the most aggressive in its AI investments, with founder and Chief Executive Mark Zuckerberg building a division called Meta Superintelligence Labs. The company expects to spend well over half its revenue on capital investments this year, which could push free cash flow negative for the first time as a public company, according to the Journal. Bloomberg reported last week that Meta is developing a cloud-computing business using the extensive AI network it has built. Zuckerberg told investors at the company’s annual shareholder meeting in late May that renting out capacity is an option if Meta determines it has overbuilt. “We haven’t done that yet because we think that we have a use for the compute,” Zuckerberg said. “But obviously, if we get to a point where we feel that we have overbuilt, then that is an option that we have.”

The report of Meta’s potential cloud service triggered a broad selloff in AI-exposed stocks. The PHLX Semiconductor Index slid 11% over a two-day period, according to the Journal. Major chip makers including Nvidia, Broadcom, Advanced Micro Devices, and Intel all fell. Memory-chip makers SK Hynix and Micron each lost 17% and 15%, respectively, in that timeframe. Caterpillar, whose generators power data centers, shed 10% over two days. The Nasdaq composite index fell nearly 2% over the two-day period.

Not all signs point to a pullback. Before SpaceX went public last month, its xAI business signed a major deal to share computing capacity with Anthropic for $1.25 billion a month, the Journal reported. SpaceX itself spent $12.7 billion in capital expenditures on its AI division last year—triple its rocket-business spending—and analysts expect more than $37 billion in AI capex this year, per Visible Alpha.

Analysts remain divided on whether Meta intends to scale back. Jefferies analyst Brent Thill wrote that “Meta is not stepping away from the AI race; it is turning early, aggressive capacity commitments into a strategic value creation option.” Justin Patterson of KeyBanc Capital said “it is conceivable that the scope of MSL’s ambitions have narrowed vs. Meta’s original AI goals when it began the capex cycle,” the Journal reported.

Chip companies alone now make up about 18% of the S&P 500’s total market capitalization, compared with about 5% five years ago, according to S&P Global Market Intelligence data cited by the Journal. The four hyperscale companies’ combined capital expenditures are projected to reach $710 billion this year and could hit $1 trillion in 2027, though the growth rate would be roughly half of this year’s pace.