Welcome to the podcast.
I'm your host, Jaden Shafer.
So I'm not going to lie.
I feel like recently it feels a lot like in AI and just the industry in general.
It's turned into a giant contest of who can spend the most money on data centers.
I think it makes sense from a logical perspective, right?
Basically, the more data centers you have, you have more compute and the more compute you have, your AI systems get better.
And if you have a better AI system, you're ultimately going to get the most customers and you're going to be like the king of the AI era of, you know, the tech era of AI.
So I think it makes a lot of sense.
And that logic, though, I do think it has some limits in a lot of different industries.
You know, your long term success is still going to come down to how much money you make, and if you're making more money than you spend.
So I think right now we have this kind of interesting moment where, with big tech, the compute, you know, you could call it an arms race, but it's basically everyone is spending insane amounts of money.
And that's sort of what is dictating who's going to be the winner.
So if that is the game though, I think right now Amazon is definitely in the lead.
So today on the podcast, I want to break down recent earnings reports from Amazon and also want to talk a little bit about Google and Amazon and how they are spending on CapEx, because it is absolutely insane.
Before we get into all of that, I wanted to make a huge announcement about my own startup, which is AIboxai.
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I'll leave a link in the description to AIbox.ai.
I think right now, the thing that a lot of people are talking about is Amazon when it comes to how much is getting spent on AI.
They did a recent earnings report on Thursday and they said that they expect to spend about 200 billion on CapEx through this year.
A lot of that's getting spent on AI, custom chips, robotics, and also low Earth orbit satellites.
I think this is a really big increase from the $131 billion it spent last year.
So, I mean, it's not quite double, but $200 billion from $131 billion, that is a massive jump.
Now, while I think it would be tempting for them and any company to give all of that to AI with, just given the industry and everything that's going on right now, I think Amazon is a little bit unique among a lot of other tech companies because they also, in addition to having a big tech face, they also operate a massive physical footprint right,
A lot of that is being retrofitted for robotics and automation, which makes it a lot harder to kind of dismiss the non-AI portion of their capital budget.
But if you look at other companies too in the space, like Google's not far behind.
Google said on Wednesday that they're expecting to spend 175 billion to 185 billion in CapEx this year, which is up from 91 billion the year before.
These are massive jumps, going from 91 billion to 175 billion, or from 130 billion to 200 billion.
Like these, these numbers are just going crazy.
Meta also had their earnings report last week and they projected between 115 and 135 billion in capex for this year.
Oracle, which was, you know, once seen as, basically you know, one of the major uh beneficiaries of the ai infrastructure boom.
I mean they have the 500 million dollar OpenAI and SoftBank deal that they're doing to build data centers and infrastructure.
But even Oracle is expecting to spend not quite as much, $50 billion this year.
So I think Microsoft hasn't yet said how much they're gonna be spending this year, but I think a bunch of recent quarterly CapEx expenditures totals were about 375 billion and that kind of annualizes to about 150 billion.
If they're spending that they have going on right now.
If that remains steady, Microsoft should be at about 150 billion.
So I think that increase has also drawn investor scrutiny, but I think still Microsoft is far behind Amazon and Google just in overall spending, because those companies are you know.
It's absolutely insane.
So I think if you look at it from inside the tech industry, it's like it makes sense why they're doing this.
If AI is really going to reshape the economy, then whoever has the most high-end compute is going to become overpowered.
You know the person that has this really scarce resource.
And this is globally too.
So I think whatever company controls their own supply right now is going to survive.
Everyone else is going to get bidded out.
It's going to get pretty, you know, it's going to get pretty crazy.
And you even have people like Elon Musk, who's you know going to be building data centers in space, because he said, you know, the earth doesn't have enough compute and energy, and you know all this other stuff.
So That's kind of his solution.
So I think, with all of that, some of the biggest tech companies right now are just trying to race to prepare for basically, a future that is defined by compute scarcity.
This is something I think we're going to have to live with.
Investors are, I mean, not very enthusiastic about this because basically every company is making all of these massive commitments.
And all of them.
After doing that, they've all seen their stocks drop following their earnings reports.
I think the steepest decline was coming from the people who said that they were going to spend the most amounts of money.
So it feels like investors are kind of rolling their eyes like, oh man, do we really need to spend all that?
It feels like a risk, but i will say that kind of some of this investor pushback isn't just limited to companies that are still looking for a clear ai business model.
I think it also is extended to companies like amazon and microsoft that already operate, you know, really highly profitable cloud businesses.
They have really straightforward plans for monetizing ai.
The problem, i think, at least from if you're kind of looking at it from like a Wall Street perspective, is just the scale right.
The numbers involved are just enormous.
Like they're huge.
So I think there's a lot of skepticism that has kind of like slowed down the industry in a bit.
Like if you believe AI is going to really transform almost every single sector.
I think it'd be irrational to pull back just because investors are kind of uneasy in the short term.
So I think that's one side of it, but I think still a lot of these big tech companies are now kind of getting a lot of pressure to justify or maybe at least soften some of the optics of their spending.
Amazon's cloud business is kind of explaining why their company is willing to push so aggressively.
AWS ended 2025 with the strongest quarterly growth rate in more than three years.
So in the fourth quarter, AWS generated $35.6 billion in revenue.
That is a 24% year-over-year increase, and it's the fastest growth in 13 quarters.
So basically, that puts AWS on an annualized revenue run rate of $142 billion.
I think operating income for that particular segment also rose.
It went up to about $12.5 billion. in the quarter from $10.6 billion a year earlier.
So, I mean, these things are growing so fast.
During the whole earnings.
Call the CEO, Andy Jassy.
He was kind of emphasizing just the significance of that growth and how it's scaling.
I think growing 24 on 142 billion run rate is just, you know.
I mean, this is way different than just posting higher percentage growth of a much smaller base, right?
Like you see a small company and it's like, wow, this company doubled in size this year.
That sounds phenomenal.
But like if you can grow 24% on $142 billion, that is huge.
So he was arguing in his call that AWS is going to continue to add more incremental revenue and capacity than any other competitor.
And I mean, I think they are just, you know, by and far, they're one of the leaders in the space.
I think they've done a lot of really smart investments into Anthropic, for example, giving them you know, in the early days 4 billion.
They keep investing into them.
And of course a lot of that investment is contingent on them coming back and spending with AWS.
So I think their growth is looking really good.
And I think a lot of the growth that they saw.
That 24 was part of a whole bunch of new agreements with big companies and government customers.
I think Salesforce BlackRock, Perplexity and the US Air Force are all new customers making new deals with them.
Something else that their CEO was pointing out is that more of the top 500 US startups rely on AWS as their primary cloud provider than on the next two providers combined.
In the fourth quarter alone, AWS actually added more than a gigawatt of power capacity to their data center network, and a gigawatt is really, really impressive.
According to them, a huge chunk of AWS demand is still coming from their enterprises, which are migrating infrastructure from on-premise systems to the cloud, which I mean.
I think this is a trend that you'll continue to see.
A lot of people used to run all of their own compute and data centers and stuff like that and they would do it at their headquarters or some sort of data center and a lot of them are just moving it over to AWS to have them manage it.
I think at the same time, AI workloads are also increasingly reinforcing, like why these companies need to move to the cloud because they just don't have the resources to do it on site.
I think a lot of customers are running really large AI models on AWS and they kind of expect that their broader cloud footprint needs to expand.
AWS accounted for 16.6% of Amazon's $213.4 billion in total revenue in the fourth quarter, which I think shows it has like it's a huge chunk of the company's future.
But I mean, 16% isn't everything.
Obviously, Amazon is still doing a lot of revenue from other segments.
But even with all of that revenue and all of that growth, I think that still wasn't enough to calm down some of their investors.
Because after the whole earnings call, Amazon shares still fell about 10 after hours as the market was kind of reacting to this really aggressive capital expenditure plan, and also they had a miss on earnings per share expectations.
So even though you know aws might be outperforming, other areas were not, and so i think from now, like basically wall street is telling amazon, you know, even when the business fundamentals look really good, i think there's still a limit to how comfortable investors are with spending hundreds of billions of dollars on a future that hasn't yet fully arrived for the company.
But I think you know AI definitely, and a lot of these, you know data centers and all these things are a huge part of the future for Amazon.
But, you know, today they're making a lot of money from other areas as well.
So I think Wall Street wants to still prioritize a lot of those segments.
It'll be interesting to see, but we see Amazon, Google and so many others spending a lot of money.
It's going to be interesting in 2026 to see some of those build outs and how that fares for a lot of these companies.
Thanks so much for tuning into the podcast.
If you enjoyed this episode, make sure to go check out AIbox.ai.
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So links in the description to AIbox.ai, and I will catch you in the next episode.
