Big Tech’s spending plans have surprised investors recently, but these plans could also signal a buying opportunity, according to Canaccord Genuity. Shares sold last week as Microsoft, Metaplatform, Amazon and Alphabet’s latest quarterly reports revealed stepped-up capital spending plans, reigniting concerns about spending if artificial intelligence fails to turn a profit. Here’s a breakdown of hyperscalers’ latest spending plans from Canaccord Genuity: Microsoft’s capex is expected to increase to $123 billion in 2026, up from $83 billion last year Meta’s increase from $72 billion to $125 billion Amazon’s increase from $72 billion to $155 billion Alphabet’s increase from $92 billion to $185 billion Combined capital spending could reach $588 billion, or about 2% of expectations, the company announced its 2026 U.S. gross domestic product. Amazon stock has fallen about 12% so far this month. Microsoft and Alphabet are each down more than 3% over the same period, while Meta is down about 5%. According to Canaccord Genuity analyst Michael Graham, this decline could present a buying opportunity for mega-cap stocks as long as the company’s growth profile remains attractive. “All of these companies plan to spend three to six times more in capital this year than they did in 2023, and these spending projections are expected to amount to about 2.1% of U.S. GDP in 2026, making it the largest infrastructure project in U.S. history and just shy of the Louisiana Purchase (according to WSJ) at about 3%,” Graham wrote in a note Monday. “Historically, a dip around spending plans has been a good time to get into these stocks as long as there is growth,” Graham added. A number of companies have been punished recently despite reporting strong quarterly growth. Alphabet showed that Google Cloud revenue growth accelerated year over year to 48% from 34% in the previous quarter. Amazon Web Services’ revenue rose 24% on an annual basis, up from 20% in the previous quarter. To be sure, spending remains a concern for investors. Megacaps have large amounts of cash to fund infrastructure development, but they are also starting to tap into the bond market to fund these projects, and investors need to start monitoring how leverage is being managed. Alphabet aims to raise about $15 billion by selling high-quality U.S. dollar-denominated bonds, Bloomberg reported on Monday, citing people familiar with the plans. In October, Meta issued $30 billion in investment-grade bonds to finance data center construction. “Whether this spending barrier is simply too high remains to be seen,” Graham wrote. The overall outlook for non-technology markets remains positive. Graham noted that the S&P 500 broke through support at the 50-day moving average and 100-day moving average last week, as well as support around 6,800, but by Friday the index had managed to recover those levels. Meanwhile, the equal-weighted S&P 500 outperformed, with cyclicals and small-cap stocks continuing to rise with rotation out of tech stocks.
