Eseandre Mordi
⬤ Microsoft and Alphabet are going all-in on AI infrastructure, breaking away from years of cautious spending despite sitting on massive cash piles. Both tech giants are now burning through reserves they built up during the pandemic's zero-rate era, redirecting that capital into a rapid buildout of data centers and AI systems. The numbers tell the story: Microsoft's capex has jumped from roughly $21B in 2021 to an estimated $65B in 2025, while Alphabet's spending climbed from $22B in 2020 to nearly $60B in 2025.
⬤ Here's the thing: these companies are actually drawing down their cash and short-term investments to fund this expansion, which marks a real shift in strategy. During the near-zero rate years, hyperscalers like MSFT and GOOGL basically hoarded cash while only slowly expanding their infrastructure. Now they've found something worth spending on, and AI development has become compelling enough to trigger this level of aggressive investment. The data shows that even with Treasury yields rising, inflation-adjusted TIPS remain below pre-financial-crisis levels, suggesting the broader economy still lacks major investment opportunities that can absorb this kind of capital.
⬤ Let's be real: AI capex isn't competing with other high-return projects because there simply aren't many opportunities out there that can absorb the 12- to 13-figure capital pools these mega-cap firms control. This fits perfectly with secular stagnation theories, where too much savings chases too few attractive projects, keeping natural interest rates low. For MSFT and GOOGL, AI infrastructure represents one of the rare outlets where they can deploy substantial capital while building long-term strategic value.
⬤ AI spending is likely to stay elevated because it's one of the few games in town big enough to matter for companies at this scale. With both giants continuing to invest aggressively and tapping both accumulated cash and borrowing capacity, the AI buildout won't be constrained by financing conditions anytime soon. This positions AI capex as a defining trend in corporate capital allocation rather than just another passing investment theme.
Eseandre Mordi
