Original author: Li Jia

Original source: Wall Street Insight

Google's parent company Alphabet will announce its second-quarter earnings after US stock market close on July 22 (which is the early morning of July 23 Beijing time), but the market's true focus is not on the quarterly profit performance but on whether the management will further raise its AI capital expenditure (Capex) guidance.

Robert Castellano, president of The Information Network with over 40 years of experience in technology industry research, pointed out that multiple industry chain signals suggest that the Capex expectation of $180 billion to $190 billion for 2026 provided by Alphabet may have been overly conservative. As the construction of AI data centers continues to accelerate and demand for cloud computing remains strong, Alphabet's future AI infrastructure investment is likely to maintain an upward trend.

Castellano expects that Alphabet may raise its 2026 capital expenditure guidance to $190 billion to $200 billion in its earnings report while keeping the statement that 2027 spending will be close to $300 billion unchanged.

At the same time, Deutsche Bank has also significantly raised its forecast for Alphabet's future capital expenditures. According to a previous article from Wall Street Insight, Deutsche Bank estimates that Alphabet's Capex for 2027 will reach about $325 billion, a substantial increase from the previous forecast of $250 billion; the capital expenditure for 2028 may further rise to $365 billion to $370 billion.

If this trend materializes, it means that the investment cycle for AI infrastructure is still expanding, and the market's previous concerns about AI capital expenditures nearing a peak and slowing growth momentum may face a reevaluation.

The AI Arms Race Intensifies: The Five Tech Giants' Capital Expenditures May Exceed $770 Billion in 2026

The wave of investment in AI infrastructure is entering a stage of larger-scale expansion, and the direction of Alphabet's capital expenditures has market significance that far exceeds that of a single quarterly report.

As hyperscale cloud providers continue to ramp up investments in data centers, computing power, and energy infrastructure, capital input is shifting from gradual growth in the past to a long-term competition measured in hundreds of billions of dollars.

According to market data, the combined capital expenditures of Alphabet, Amazon, Microsoft, Meta, and Oracle have significantly increased from $271 billion over the past 12 months ending in April 2025 to $482 billion for the 12 months ending in April 2026. Based on the current guidance of each company and market expectations, the combined capital expenditures of the five giants are expected to reach $745 billion to $775 billion for the entire year of 2026, an increase of about 55% to 61% compared to the previous period.

This figure not only reflects the tech giants' bet on the commercial prospects of AI but also indicates that they are becoming the core driving force behind demand growth in the entire semiconductor supply chain.

The Five Giants Dominate the AI Infrastructure Investment Cycle

It is noteworthy that the capital expenditures exceeding $770 billion will not all be directed towards chip suppliers. This includes multiple areas such as servers, network equipment, data center construction, land, power facilities, and energy supply systems.

However, from the perspective of the supply chain, each new AI data center will drive synchronous expansion across multiple segments. From high-performance computing chips, HBM storage, to advanced packaging, wafer fabrication, testing equipment, and high-speed interconnect networks, AI infrastructure investment is forming a complete supply chain pull effect.

The core focus of the market is that the current demand in the AI supply chain is not driven by a single enterprise but is determined by a few hyperscale cloud providers. Their procurement pace for GPUs, custom ASICs, HBM, optical networks, and data center power systems is becoming an important indicator for measuring the overall semiconductor cycle's prosperity.

Therefore, whether Alphabet further adjusts its capital expenditures is not only a judgment on the prospects of the Gemini model and Google Cloud business but also a validation of the intensity of demand for AI infrastructure in the next stage.

Meta Leases Buffer, Google Orders Backstop—Two Paths for AI Capital Expenditures

Recently, Meta is considering selling part of its AI infrastructure capacity to external customers, sparking discussions about whether there is an oversupply in AI investments. However, from an industrial logic perspective, this move appears more like improving asset utilization rather than reducing investment.

According to adjusted forecasts from Wells Fargo, the main reason Meta is externalizing part of its AI infrastructure capacity is that there is a time lag in releasing internal inference demand; it hopes to achieve asset returns early by leasing externally. This means that Meta is commercializing the computing resources it has already invested in rather than being forced to digest excess capacity due to insufficient demand.

In contrast, Alphabet has a stronger internal digestion capability. Google Cloud currently has a backlog of contracts amounting to $462 billion, and enterprise clients' demand for AI computing power and cloud services has formed strong order support. This means that Alphabet’s new capital investments can correspond more directly to future revenue growth, and the commercial certainty of its capital expenditure expansion is also higher.

Alphabet's Earnings Report as an Important Observation Window for the AI Cycle

For the market, the key to the second-quarter earnings report announced by Alphabet on July 22 is not just the profit and revenue performance but whether the management will further raise AI capital expenditure expectations.

If Alphabet raises its capital expenditure guidance for 2026, it will strengthen the market's judgment on the continuity of the AI infrastructure investment cycle and provide new fundamental support for the chip, storage, advanced packaging, and data center supply chain.

Conversely, if capital expenditures fall below expectations, the market may reassess the AI investment return cycle and exert short-term pressure on the valuations of related tech stocks.

As Microsoft, Meta, and Amazon subsequently announce their earnings, Wall Street will further observe whether this AI infrastructure race is still accelerating and whether the hundreds of billions of dollars in capital investments can continue to translate into revenue growth.

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