AI boom in data centers has top tech companies spending more than major oil companies on capex
By Joy Wiltermuth
Four biggest tech 'hyperscale' cloud companies are expected to spend almost $200 billion annually in 2025
The race for new and upgraded data centers to handle the artificial-intelligence boom has the world's top technology titans far outpacing major oil companies in capital expenditures, according to the Wells Fargo Investment Institute.
Alphabet Inc. (GOOG) (GOOGL), Amazon.com Inc. (AMZN), Meta Platforms Inc. (META) and Microsoft Corp. (MSFT) - the four largest cloud infrastructure companies by market capitalization - have begun shelling out significantly more on capital expenditures than their counterparts in the oil industry since the pandemic erupted in 2020.
The biggest "hyperscale" cloud companies reported about $140 billion in combined capital expenditures in 2023, while the four biggest global integrated oil companies by market capital - BP (BP), Chevron Corp. (CVX), Exxon Mobil Corp. (XOM) and Shell PLC (SHEL) - were closer to a combined $80 billion.
Crude oil prices (CL00) (BRN00) shot up to past $100 in March 2022 in the wake of pandemic shocks and Russia's war in Ukraine, before supply cuts by major oil producers pushed prices back down to $80 a barrel. When energy costs rise, oil companies historically have increased capital expenditures to bolster crude production.
However, Larry Pfeffer, an equity-sector analyst in the industrials at the Wells Fargo Investment Institute, expects spending by the top four hyperscale tech companies to reach almost $200 billion annually by 2025, a boom that will have "ripple effects."
Data centers have been a niche part of commercial real estate for years, with needs growing in the wake of the COVID crisis and with the release in late 2022 of ChatGPT, especially for newer facilities that can handle the voracious demand for power needed by AI-focused clients.
Read: AI is fueling a gold rush in new data centers, the hottest buildings in real estate
-Joy Wiltermuth
This content was created by MarketWatch, which is operated by Dow Jones & Co. MarketWatch is published independently from Dow Jones Newswires and The Wall Street Journal.
(END) Dow Jones Newswires
03-04-24 1908ET
Copyright (c) 2024 Dow Jones & Company, Inc.-
What History Tells Us About the Fed’s Next Move
-
What’s Happening In the Markets This Week
-
Alphabet’s New Dividend: What Investors Need to Know
-
Going Into Earnings, Is Palantir Stock a Buy, a Sell, or Fairly Valued?
-
Going Into Earnings, Is Eli Lilly Stock a Buy, a Sell, or Fairly Valued?
-
What’s the Difference Between the CPI and PCE Indexes?
-
5 Stocks to Buy That We Still Like After They’ve Run Up
-
Markets Brief: Stocks Are Starting to Look Cheap Again
-
AbbVie Earnings: Next-Generation Immunology Drugs Help Offset Humira Biosimilar Pressure
-
Exxon Earnings: Ignore Earnings Shortfall as Long-Term Growth and Improvement on Track
-
American Airlines Earnings: We See Costs Overshadowing Market Share This Year
-
Snap Earnings: Advertising Growth and Snapchat+ Drive Monetization
-
STMicro Earnings: We Still See an Attractive Margin of Safety Despite a Poor First-Half Forecast
-
Alphabet Shares Surge on Strong Earnings, Dividend Surprise
-
Microsoft Earnings: Firm Beats Forecasts on Strong AI and Cloud Demand
-
PG&E Earnings: Near-Term Regulatory Certainty Supports Industry-Leading Earnings Growth