Why can't overseas tech giants stop burning money?
According to Wind-chasing Trading Desk, Morgan Stanley's latest research points out that global cloud computing capital expenditures are expected to soar to about $735 billion in 2026, a year-on-year increase of about 60%, marking the third consecutive year that the growth rate exceeds 60%. This forecast has been significantly revised upward by 22 percentage points compared to three weeks ago, with additional spending of about $120 billion.
The core driver behind this upward revision is the strong capital expenditure guidance released by the four major US hyperscale cloud service providers during the latest earnings season. Alphabet, Amazon, Microsoft, and Meta have all significantly raised their investment plans for 2026. Although the growth rate will slow compared to 2025, maintaining such a high intensity of capital expenditure growth for three consecutive years among the world's top 11 cloud service providers is unprecedented in the industry’s tracking history.
The research believes that, with AI-driven computational power demand continuously surpassing supply, the high-intensity investment cycle for cloud infrastructure will persist. This trend is a clear boon for suppliers within the cloud computing industry chain who are highly exposed to capital expenditures.
Capital Expenditure Intensity Reaches Historic High
The capital expenditure intensity among the world's top 11 cloud service providers has climbed to over 26% of total revenue, a historical high three times the average level from 2014-2023. Just a year ago, the forecast for global cloud capital expenditure for 2025-2026 was around $710 billion, but now this expectation has surged to $1.2 trillion, meaning cumulative forecast upgrades of nearly $500 billion.
Morgan Stanley’s forecast for global cloud capital expenditure in 2026 has reached $795 billion, about 8% higher than current market consensus. Given that major cloud service providers have revised up their capital expenditure guidance quarter by quarter for at least nine consecutive quarters, analysts believe the current market outlook still has room for further upward revision.
US Hyperscale Cloud Providers Significantly Increase Investment
The four major US hyperscale cloud service providers have further clarified the accelerating trend of AI-driven capital expenditure in the latest earning season. Meta has set its 2026 capital expenditure guidance at $115-135 billion, a 73% year-on-year increase based on the median, with funds mainly allocated to the Meta Super Intelligence Lab and broader AI infrastructure needs.
Alphabet announced a 2026 capital expenditure guidance of $175-185 billion, with the median representing a 97% year-on-year increase. Spending is expected to ramp up each quarter within the year, primarily supporting Google DeepMind, user-end AI function optimization, and large-scale cloud infrastructure expansion. The company revealed that about 60% of expenditures will be for server procurement, while the remaining 40% will go to data centers, networking, and other long-term assets.
Amazon is expecting 2026 capital expenditure of about $200 billion, up 52% year-on-year, mainly invested in AWS to meet surging demand for both core non-AI and AI cloud workloads. The company emphasized its monetization pace aligns closely with capacity deployment progress.
Microsoft, while not providing specific quantitative guidance for 2026, noted that capital expenditures in the March quarter this year will decline sequentially due to fluctuations in the pace of cloud infrastructure construction and financing lease delivery schedules. Management stated that short-term assets (CPU and GPU servers) will account for about two-thirds of capital expenditures, similar to the previous quarter's structure.
The Supply Chain is Benefitting Significantly
According to Morgan Stanley's analysis, among the more than 50 technology companies it covers, revenue contributions from cloud capital expenditure average about 45%.
As the number of AI tokens processed monthly increases exponentially, total revenue growth for Google Cloud, AWS, and Azure is accelerating, data center construction commitments are expanding, and key component suppliers broadly report faster demand and longer visibility. Morgan Stanley believes these factors will further drive upward pressure on capital expenditure forecasts for hyperscale cloud service providers.
It is expected that cloud revenue growth for the top four US cloud service providers will increase to the 30%-35% range over the next few quarters, marking the strongest growth levels since 2020. Based on this forecast, non-AI-related cloud capital expenditure will grow by 80% year-on-year in 2025, and will still maintain a high growth rate close to 60% in 2026.
Market Expectations Continue to be Revised Upward
In the past year, consensus forecasts for cloud capital expenditure in 2026 have been revised upward by about 100%, resulting in a cumulative increase of about $370 billion. Morgan Stanley points out that as long as the industry outlook for cloud expenditure remains positive, related forecasts still have room for further upgrades.
All four major US hyperscale cloud service providers indicate they will continue to face supply constraints for critical computing resources throughout 2026, and will need to accelerate investments and optimize capacity allocation to meet the rapidly rising demand. This persistent supply-demand imbalance provides structural support for maintaining high-intensity capital expenditure growth.
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The above highlights are from Wind-chasing Trading Desk.
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