{"id":5817,"date":"2025-05-17T22:41:17","date_gmt":"2025-05-17T14:41:17","guid":{"rendered":"https:\/\/cicserver.com\/microsoft-and-amazon-capex-in-focus-amid-potential-ai-pullback\/"},"modified":"2025-05-17T22:41:17","modified_gmt":"2025-05-17T14:41:17","slug":"microsoft-and-amazon-capex-in-focus-amid-potential-ai-pullback","status":"publish","type":"post","link":"https:\/\/cicserver.com\/de\/microsoft-and-amazon-capex-in-focus-amid-potential-ai-pullback\/","title":{"rendered":"Microsoft and Amazon Capex in Focus Amid Potential AI Pullback"},"content":{"rendered":"


\n<\/p>\n

\n

(Bloomberg) — When the two biggest players in cloud computing report earnings this week, the amount the companies are spending will be just as interesting to investors as how much they are making.\u00a0<\/span><\/p>\n

Ahead of results from Microsoft on Wednesday and Amazon on Thursday, there have been reports suggesting that both companies may be cutting back on their spending on artificial intelligence infrastructure.\u00a0<\/span><\/p>\n

That puts a spotlight on the capital expenditures announced in the latest earnings, which will offer insight into the outlook for AI demand and the broader consequences that might have for the economy.\u00a0<\/span><\/p>\n

\u201cA slowdown in cloud computing or capex would scream economic caution and speak to recession fears in corporate America,\u201d said Joe Tigay, portfolio manager of the Rational Equity Armor Fund. \u201cAny cutback in growth is hurtful to valuations, and would be damaging to the overall market. While multiples have come down a lot, we\u2019re not drastically cheap by any historical measure. If we are on a recessionary path, multiples will get a lot lower.\u201d<\/span><\/p>\n

Both Microsoft and Amazon have declined this year, largely tracking the market lower as <\/span>tariff risks<\/a><\/span> have amplified concerns about economic growth. Amazon is more than 20% off a February peak, while Microsoft hasn\u2019t hit an all-time high since July.\u00a0<\/span><\/p>\n

Related:<\/span>OpenAI to Invest in Efforts to Build AI Infrastructure Overseas<\/a><\/p>\n

Microsoft was unchanged on Tuesday, while Amazon fell 1.5%. Amazon\u2019s weakness came after White House Press Secretary Karoline Leavitt said that the e-commerce company\u2019s reported decision to display the impact of tariffs on pricing was a \u201chostile\u201d act.<\/span><\/p>\n

The four biggest spenders on AI infrastructure \u2013 Alphabet and Meta Platforms, along with Microsoft and Amazon \u2014 are expected to spend more than $300 billion in their current fiscal years. The money plowed into AI-related investments had led to soaring stock gains in companies like Nvidia, Super Micro Computer, and Arista Networks.<\/span><\/p>\n

Recently, though, Microsoft and Amazon have been at the center of a shift in expectations around industry spending. Bloomberg News\u00a0reported\u00a0that Microsoft has <\/span>pulled back on data center projects<\/a><\/span> around the world, with some of the pause coming\u00a0abruptly. TD Cowen analyst Michael Elias last week wrote that channel checks \u201cindicate material MSFT equipment order cancellations\u201d for data center supplies with a \u201clong-lead time.\u201d<\/span><\/p>\n

Separately, Wells Fargo Securities wrote that Amazon\u2019s web services business is pausing some data center leases, although Kevin Miller, vice president of global data centers at Amazon Web Services, later\u00a0<\/span>wrote<\/a><\/span>\u00a0that there \u201chaven\u2019t been any recent fundamental changes in our expansion plans,\u201d and that it continues to see \u201cstrong demand for both Generative AI and foundational workloads on AWS.\u201d<\/span><\/p>\n

Related:<\/span>Google Awards Malaysia Data Center Contract to Gamuda<\/a><\/p>\n

Alibaba Group Holding Chairman Joe Tsai had warned in March of a \u201cbubble\u201d in data center construction. The emergence of the <\/span>Chinese AI startup DeepSeek<\/a><\/span> scrambled forecasts for future spending after the newcomer claimed performance that was comparable to U.S. models despite costing less and requiring fewer chips. Investors are also increasingly looking for the AI investments to translate to growth in a more pronounced fashion.<\/span><\/p>\n

Ned Davis Research closed its overweight recommendation on AI stocks last week, writing that the downturn in the group can continue, especially with the new risks created by the Trump administration\u2019s trade war.<\/span><\/p>\n

\u201cHigher policy uncertainty often leads to lower capex spending. We see no reason data center capex spending would be excluded,\u201d wrote Pat Tschosik, the firm\u2019s chief thematic strategist. He added that \u201cAI spending is seen as discretionary and, just as companies pull back on capex in an economic downturn, they pull back on AI application development as well.\u201d<\/span><\/p>\n

Alphabet\u00a0reported\u00a0capex of $17.2 billion last quarter, slightly more than had been expected. It plans to spend $75 billion on capex this year.\u00a0<\/span><\/p>\n

Related:<\/span>Data Center REITs: A Guide to Investing in Digital Infrastructure<\/a><\/p>\n

The Google parent also posted better-than-expected operating profits for its Google Cloud business, even as sales slightly missed the analyst consensus. The company said there was more customer demand than company capacity for the cloud business, echoing\u00a0comments\u00a0made by all three cloud giants last quarter.\u00a0<\/span><\/p>\n

Microsoft results are expected to show net earnings growth of 9.7% and revenue growth near 11%. Amazon\u2019s revenue is seen rising 8.2% with net earnings soaring almost 40%. Both are expected to grow consistently in the coming years, a key reason why Wall Street is nearly uniformly positive on them. For both names, more than 90% of the analysts tracked by Bloomberg recommend buying the shares.\u00a0<\/span><\/p>\n

Jim Worden, chief investment officer of Wealth Consulting Group, is among those who retains a positive view on the pair.<\/span><\/p>\n

\u201cI don\u2019t think we\u2019ll see big reductions in capex, though there will likely be some discussion about being more efficient and how to best spend the money,\u201d he said. \u201cUncertainty is still really really high, but we\u2019ve barely touched the surface for AI demand and use cases, so investors need to be patient and play the long game.\u201d<\/span><\/p>\n<\/div>\n