Alphabet Just Tied Amazon’s $200 Billion Capex Guidance. Could Amazon Raise the Bar Even Higher on July 30?

Key Points

• Alphabet had a great earnings report and increased its capex budget for 2026, but the stock fell.

• Investors are nervous that big tech companies are overspending to build AI infrastructure.

• There are three reasons why Amazon will raise capex, and here’s what the market will likely do next.

• 10 stocks we like better than Amazon ›

Big tech companies and spending on artificial intelligence and its infrastructure have been one of the biggest stories in the stock market this year, ever since Amazon (NASDAQ:AMZN), Alphabet (NASDAQ:GOOG) (NASDAQ:GOOGL), Microsoft, and Meta Platforms disclosed plans to spend $700 billion on capital expenditures this year.

Of that, Amazon was the biggest spender at $200 billion, with Alphabet close behind at $185 billion. But in the company’s second-quarterearnings callwith analysts, Alphabet executives announced plans to join Amazon in the $200 billion club, spending its capex primarily on servers, connectivity, storage, and memory for data centers.

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Alphabet stock fell 6% the next day. Will Amazon also raise its capex spending when it reports earnings on July 30? And just as importantly, will Amazon stock face the same fate as Alphabet?

Image source: Amazon.

Why is Alphabet raising capex?

Alphabet, the parent company of Google, spent $44.9 billion on capex in the second quarter, with 60% of that on servers and 40% on data centers and networking equipment. It had previously projected full-year capex to be in a range of $180 billion to $190 billion; it now anticipates spending between $195 billion and $205 billion.

“We’re still in a supply constraint environment. I think we’ve said this now for multiple quarters in a row, we are seeing very strong demand, both from external cloud customers as well as across the business. Our goal is to invest as long as we see an attractive return on that investment,” CFO Anat Ashkenazi said.

In short, Alphabet says that demand is outpacing computing capacity, even though Alphabet is accelerating its spending.

Overall earnings for Alphabet were exceptionally strong, with revenue of $119.79 billion, up 24% from a year ago. Google Cloud revenues were $24.76 billion, up 82% from a year ago.

How likely is it for Amazon to also raise capex?

I believe it’s very likely. First, consider that Amazon is a much larger cloud provider than Alphabet. Amazon Web Services has the greatest global share of the cloud computing market at 28%, followed by Microsoft at 21% and Google Cloud at 14%.

Second, Amazon has been very public and bullish about its capex. In a letter to shareholders in April, CEO Andy Jassy posted a lengthy statement on Amazon’s website justifying the company’s planned spending and saying it would be a “meaningful leader” in AI.

We’re not investing approximately $200 billion in capex in 2026 on a hunch. The recent OpenAI commitment (over $100 billion) is an example of this, but there are several other customer agreements completed (and unannounced), or deep in process. Of the AWS capex we expect to spend in 2026, much of which will be monetized in 2027-2028, we already have customer commitments for a substantial portion of it.

And third, there are indications that major hyperscalers are accelerating their AI spending. BNP Paribas analyst Stefan Slowinski recently predicted in an investor report that Microsoft, the No. 2 cloud computing company by market share, would spend a whopping $262 billion on capex in its 2027 fiscal year. (Microsoft reports its fiscal fourth quarter and full year 2026 earnings on July 29, but the company had previously disclosed $104.3 billion in capex spending through its first three quarters.)

What to expect from Amazon’s earnings

First, I would be shocked if Amazon did not increase its projected capex, but I also expect the market to react poorly because of it. Investors are very focused on the pressure big tech’s capex spending is putting on free cash flow, and I understand why there are concerns that Alphabet, Amazon, and the rest won’t be able to realize a profit from all this spending.

But as Jassy points out, Amazon isn’t spending blindly. As long as Amazon’s spending and planned investment are backed by customer commitments and the demand for more computing power exists, then Amazon looks to be a long-term winner. Any dip in the stock following earnings could be an appealing opportunity to acquire more shares.

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Patrick Sanders has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Alphabet, Amazon, Meta Platforms, and Microsoft. The Motley Fool has a disclosure policy.