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Meta, Alphabet, Microsoft and Amazon will increase spending in 2026; ‘Are we in a bubble?’

Silicon Valley’s largest companies plan to invest $400 billion in AI this year, with many indicating this is insufficient.

Meta, Alphabet, Microsoft, and Amazon will increase 2026 spending; Google and Amazon shares rose, while Meta and Microsoft shares fell.

Google’s CFO stated that AI investments are already generating billions of dollars in revenue for the company.

Silicon Valley’s biggest companies are already planning to pour $400 billion into artificial intelligence efforts this year. They all say it’s nowhere near enough.

Meta Platforms META -11.33%decrease; red down pointing triangle says it is still running up against capacity constraints as it tries to train new AI models and power its existing products at the same time. Microsoft MSFT -2.92%decrease; red down pointing triangle says it is seeing so much customer demand for its data-center-driven services that it plans to double its data-center footprint in the next two years. And Amazon.com AMZN -3.23%decrease; red down pointing triangle says it is racing to bring more cloud capacity online as soon as it can.

“We’ve been short [on computing power] now for many quarters. I thought we were going to catch up. We are not. Demand is increasing,” said Amy Hood, Microsoft’s chief financial officer. “When you see these kinds of demand signals and we know we’re behind, we do need to spend.”

Meta, Alphabet GOOGL 2.52%increase; green up pointing triangle, Microsoft and Amazon have all told investors over the past 48 hours that they will increase spending in 2026. Investors gave their blessing to plans laid out by Google and Amazon, with some worrying about those set forth by Meta and Microsoft.

Meta shares closed down 11% on Thursday, and Microsoft’s shares fell by nearly 3%. Google and Amazon shares rose by roughly 6% and 10%, respectively, in after-hours trading.

The mixed signals from investors are rooted in uncertainty about where the outsize spending will ultimately lead. The companies and a variety of AI boosters say the investments are necessary for machine-learning systems to reach artificial general intelligence, or AGI, a state in which they are smarter than humans.

“Whoever gets to AGI first will have an incredible competitor advantage over everybody else, and it’s that fear of missing out that all these players are suffering from,” said Youssef Squali, lead internet analyst at Truist Securities. “It’s the right strategy. The greater risk is to underspend and to be left with a competitive disadvantage.”

But skeptics have cast doubt on whether spending billions on large-language models, the most popular AI systems, will ever lead to that goal. They also point to the small number of paying users for existing technology and the need for years of training before many workers around the world will be able to effectively put it to use.

Analysts peppered executives with pointed questions on the investor calls that took place after the earnings results were announced. On Microsoft’s call, one analyst asked the question seemingly on everyone’s mind: “Are we in a bubble?” On Google parent Alphabet’s call, another asked: “What early signs are you seeing that gives you confidence that the spending is really driving better returns longer term?”

Google, which said its capital expenditures for the full year would jump from $85 billion to $91 billion to $93 billion, said the investments were already paying off.

“We already are generating billions of dollars from AI in the quarter. But then across the board, we have a rigorous framework and approach by which we evaluate these long-term investments,” said Anat Ashkenazi, Google’s chief financial officer.

Microsoft said it would be operating with not enough capacity to power both its current businesses and AI research to the extent needed through at least the first half of next year, and that its cloud computing business, Azure, is bearing “most of the revenue impact.”

Amazon told investors that it is moving as quickly as it can to bring new capacity online because it can make money off those investments immediately.

“You’re going to see us continue to be very aggressive in investing capacity because we see the demand,” said Amazon Chief Executive Andy Jassy. “As fast as we’re adding capacity right now, we’re monetizing it.”

Meta didn’t offer fresh details about AI model release or product timelines, or when investors would more broadly see returns on their investments, spooking some. In after-hours trading Wednesday, after its earnings call, Meta shares dropped more than 7%.

If the company is wrong about how much money it is spending to reach AGI, it will simply pivot, Meta Chief Executive Mark Zuckerberg told investors on its call Wednesday.

“I think it’s the right strategy to aggressively front load building capacity. That way, we’re prepared for the most optimistic case,” he said. “In the worst case, we would just slow building new infrastructure for some period while we grow into what we build.”

Zuckerberg also said that Meta’s current ads business and platforms are running in a “compute-starved state” while the company gives more resources to AI research and development efforts instead of shoring up existing operations.

Its capital expenditures—which already nearly doubled from last year to $72 billion this year—will grow “notably larger” in 2026, Meta CFO Susan Li said, without providing specific numbers.

Apple said on its earnings call that it is also increasing investments in artificial intelligence. But its total spending still pales in comparison to the amount the other tech giants are laying out.

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Samsung plans to embed AI throughout the semiconductor manufacturing flow

Samsung Electronics 005930 3.75%increase; green up pointing triangle plans to build a new artificial intelligence factory in partnership with Nvidia NVDA -2.00%decrease; red down pointing triangle, as the companies unveiled a new chip supply deal.

The South Korean giant said Friday that it will deploy over 50,000 Nvidia graphics processing units, embedding AI throughout the entire semiconductor manufacturing flow, which it said will accelerate the development and production process of semiconductors, mobile devices and robotics.

“Samsung’s AI Factory will integrate every aspect of semiconductor manufacturing, from design and process to equipment, operations and quality control, into a single intelligent network,” it said.

It plans to integrate its AI factory infrastructure, including Nvidia’s robotic platform for humanoid robotics and manufacturing automation, across its global manufacturing hubs, including in Texas. It aims to improve the chipmaking process, from design to production, and optimize production in real-time.

Samsung’s partnership with Nvidia spans decades. The company has been developing proprietary AI models that power more than 400 million of its devices, built on Nvidia’s accelerated computing and Megatron framework, it said.

China’s factory activity contracts for seventh straight month

Beijing fears weak domestic demand and aggressive competition among producers is driving deflation

China’s factory activity declined for the seventh month in a row in October on weak domestic demand, complicating the economic outlook for policymakers in Beijing as they grapple with a trade war with the US.

The purchasing managers' index fell to 49 this month, according to the official data released on Friday, missing the average forecast from analysts surveyed by Bloomberg of 49.6 and trailing September’s figure of 49.8. A reading below 50 represents a contraction in activity.

The results were driven by seasonal factors, such as a weeklong public holiday at the beginning of the month, as well as “a more complex international environment”, said Huo Lihui, chief statistician of the service industry survey centre of the National Bureau of Statistics.

The softer activity comes as China has pledged to step up high-tech manufacturing and increase “self reliance” in science and industry as it pursues a deepening rivalry with the US for economic supremacy.

President Xi Jinping and US President Donald Trump on Thursday agreed to a ceasefire in their trade war at a summit in South Korea, suspending export controls, port fees and some tariff. But analysts believe that the truce will be difficult to maintain given the countries’ deep differences.

China has relied on manufacturing and exports to deliver economic growth in the face of a slowdown in the property market that has undermined household confidence and spending.

Despite the slowdown reflected by the PMI data, which is in its longest continuous decline in more than nine years, activity in high-tech and equipment manufacturing — two sectors prioritised by Beijing’s industrial policies — expanded this month, the National Bureau of Statistics said.

Consumer-related sectors also grew. Beijing has promoted extensive subsidies for consumers in a push to boost domestic demand.

The statistics bureau said the non-manufacturing PMI, which includes construction and services, rose 0.1 percentage points in October to 50.1, indicating an expansion.

This was supported by sectors such as railway and air transportation, accommodation, culture, sports and entertainment. The country had an eight-day national holiday this year starting on October 1 that included the mid-autumn festival, traditionally a period of peak travel and spending.

China’s exports have proved resilient during the trade war, expanding 8.3 per cent in September on a year earlier. But authorities have become increasingly concerned that aggressive competition among producers is driving deflation by pushing down prices.

Policymakers have begun intervening in industries such as electric vehicles and solar panels to try to reduce predatory pricing, but economists worry that doing so could also deal a blow to activity.

The statistics office said new orders in manufacturing, raw materials inventories and the factories employment index declined in October, pointing to depressed activity.

“The official PMIs suggest that China’s economy lost some momentum” in October, said Capital Economics in a note. “Some of this weakness may reverse in the near term, but any boost to exports from the latest US-China trade ‘deal’ is likely to be modest and wider headwinds to growth will persist.”

Weil lawyer invested millions in fund that owned Pegasus spyware maker

Gerhard Schmidt put his own money into private equity fund that bought NSO Group, and sat on board that oversaw NSO

A partner at US law firm Weil Gotshal personally invested €5mn in the private equity fund that bought Israel’s NSO Group, the maker of military-grade spyware used to hack human rights activists, according to two people with knowledge of the matter and a New York court filing.

Gerhard Schmidt, co-managing partner of the law firm’s German offices, made the investment in 2017 using an arrangement that meant he did not have to pay the same fees demanded of other investors, the document says.

Schmidt, who Weil describes on its website as “one of the leading private equity and M&A lawyers in Germany”, was also, in his professional capacity, an adviser on the fund’s February 2019 acquisition of NSO. He also sat on the board of a holding company that oversaw the spyware firm, and chaired Novalpina Capital, the buyout group whose €1bn fund bought NSO.

Schmidt’s investment in the poorly-performing fund, and his work for NSO and its owner, underscores the extent of the white-shoe New York law firm’s involvement with a company that the US government would later say had enabled authoritarian governments to target dissidents, journalists and activists.

Weil and Schmidt did not respond to requests for comment. NSO said it “complies fully with all applicable laws and regulations, and sells its technologies exclusively to vetted intelligence and law enforcement agencies”.

The New York court filing, a declaration by an outside expert who was brought in to oversee the private equity fund after it fell into crisis in 2021, is part of a legal case that threatens to draw Weil into a wide-ranging dispute taking place in Luxembourg about the fund and its investments.

The purpose of the US lawsuit is to ask the law firm to provide information for the Luxembourg suit, which it is not a party to, though the fund is separately suing Weil in Germany over attorney fees.

NSO’s Pegasus tool can read encrypted messages, turn on a phone’s camera and microphone remotely, and track its location.

When NSO’s oversight board took steps to renew Saudi Arabia’s access to the tool after the murder of journalist Jamal Khashoggi, Schmidt was among those who “would have been voting”, the court filing said.

NSO had halted a contract with Saudi Arabia after allegations that its technology had been used to track Khashoggi, who was murdered in 2018. The kingdom’s access to the software was restored by mid-2019, according to two people familiar with the decision.

Novalpina Capital, the private equity group that bought a stake in the Israeli spyware firm, imploded in 2021 after a fallout between its founders, Stephen Peel, Stefan Kowski and Bastian Lueken, former dealmakers at the US buyout group TPG.

Schmidt was the “key legal adviser” to the €1bn Novalpina fund for its major acquisitions, including NSO, French pharmaceutical group Laboratoire XO and Romanian betting company Maxbet, the filings say.

Schmidt was able to invest in the Novalpina fund, raised in 2017, without fees because he had an “existing relationship” with the trio that founded Novalpina, according to the outside expert, Gavin Farrell, in the declaration.

It is not uncommon for senior lawyers at large firms to personally invest in the private equity funds they advise, sometimes on more generous terms than other investors.

Disclosures from the Oregon Public Employees Retirement Fund, which also invested in the fund that bought NSO, offer a glimpse into its performance.

In a report for the second quarter of 2025, the Oregon investor marked the value of its stake in the fund at 57 cents on the dollar and said the fund’s internal rate of return, a private equity performance metric, is minus 15.3 per cent.

Weil said this month that Schmidt would leave the firm at the end of this year after more than two decades as co-managing partner of its German offices.

Peel, Kowski and Lueken were stripped of control of the Novalpina fund in a highly unusual move in 2021, after investors such as public pension funds concluded they had fallen out so badly they could no longer manage the fund together.

Those investors tasked US consultancy Berkeley Research Group with winding down the fund and returning cash to investors. That responsibility now lies with Treo, an asset manager founded by former BRG directors. Farrell is Treo’s chief operating officer.

Treo said it was “wholly committed to protecting the interests of the fund and maximising value for investors, and will continue to take all necessary action to do so”.

Shortly after the Novalpina fallout, in November 2021, the US Commerce Department put NSO on a trade blacklist, saying its spyware enabled “transnational repression, which is the practice of authoritarian governments targeting dissidents, journalists and activists outside of their sovereign borders to silence dissent”.

NSO was taken over by creditors in 2023, and was later returned to one of its founders.