Here comes the AI capex shocker, Goldman Sachs says

Key Points:

• Big Tech companies like Alphabet, Meta, and Amazon are significantly increasing capital expenditures to build AI infrastructure, with this trend expected to continue until at least the first half of 2028 due to ongoing supply-demand imbalances.
• Alphabet raised its full-year capex guidance to $195-$205 billion, up from $180-$190 billion, indicating substantial investment growth, while Tesla plans to spend $25 billion in 2026, tripling its historical capital expenditures.
• SpaceX's second-quarter capital expenditures reached $18.4 billion, far exceeding estimates, with expectations for similar spending levels in the following quarters and potential AI investments of $200 billion annually over the next two years.
• Investors remain uncertain if these aggressive AI-related spending increases are fully reflected in stock prices, with market reactions varying; however, companies like Microsoft and Amazon are improving transparency on return on invested capital, which may influence future stock valuations.
• Higher input costs, including rising memory and chip prices, alongside demand for data center expansion, contribute to the elevated capital spending environment in the tech sector.