MW Google just gave a big boost to its AI spending. Why Meta and Amazon could follow.

By Emily Bary

Analysts note that new tax provisions could be giving large technology companies more flexibility to invest in chips and other AI infrastructure

Alphabet Inc. seems to be putting its new tax benefits toward more artificial-intelligence chips, according to some analysts, and its Big Tech peers may do the same.

The technology giant turned heads on Wall Street when it announced Wednesday that it was boosting its capital-expenditure forecast for the year to $85 billion from $75 billion. The Google parent company sees opportunities to invest in AI infrastructure, with its cloud business still seeing supply constraints that could last throughout 2025.

See more: Alphabet's stock turns higher after earnings, as the company talks up big spending plans

Alphabet $(GOOG.UK)$ (GOOGL) disclosed that about two-thirds of its capital expenditures in the latest quarter went toward servers, with the other third going toward data centers and networking products.

The move could be a positive for Nvidia Corp. (NVDA) and Broadcom Inc. (AVGO), whose shares are each up fractionally on Thursday. Nvidia dominates the market for graphics processing units, and customers like Google have been rushing to get enough supply of the company's Blackwell offerings to meet booming cloud demand. Broadcom, meanwhile, works with Alphabet on its custom-designed chips.

While $85 billion in capital expenditures is an eye-popping figure, and one that Rosenblatt analyst Barton Crockett noted would be 60% above what Google spent on capex in 2024, new tax legislation may provide some help here. Crockett calculated that the entire $10 billion increase to the company's 2025 capex forecast "could be covered by tax benefits in 2025 from accelerated deductions."

Alphabet didn't immediately respond to a request for comment.

Prior to the report, Morgan Stanley analyst Brian Nowak weighed in that Alphabet could be the "biggest near-term beneficiary" of the One Big Beautiful Bill Act, given that the company had about $26 billion of research and development deferred tax assets and sufficient cash taxes to allow it to take good advantage of the opportunity for an accelerated writedown of those assets.

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While Nowak saw the tax bill as a potential tailwind to Alphabet's free cash flow, he also acknowledged before the report that the company was likely to view the tax benefits as "added flexibility to continue to invest and deepen its competitive moats and generative AI offerings across its suite of products."

For Alphabet, the increased capex budget comes as the company has faced doubts on Wall Street over its AI positioning.

Will other large technology companies follow Alphabet's lead? "This investment step up is an important factor we think investors should keep in mind heading into [Meta] and [Amazon] earnings next week given the similar investment-driven tax benefits they are likely to receive too," Nowak wrote on Wednesday.

In his earlier report, he noted that Amazon.com Inc. $(AMZN.UK)$ and Meta Platforms Inc. $(META)$ don't have large enough cash tax bases to allow for fully accelerated writedowns of their deferred tax assets, but he thought they would benefit over a multiyear span.

He wrote that Amazon had "persistently higher levels of spend" on a relative basis and more eligible research and development expenses than rivals, allowing it to reap perhaps $15 billion in free cash flow benefits next year, with the chance to put some of that toward graphics processing units and other chips.

Meta, meanwhile, "has highlighted its efforts to build multiple, multi-[gigawatt] clusters, which will each require hundreds of thousands of [Nvidia] GPUs, coupled with the scaling inference needs of the company as it continues to build out infrastructure to support its improved ad recommendation and targeting, business messaging, Meta AI and other capabilities," Nowak wrote.

-Emily Bary

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July 24, 2025 10:22 ET (14:22 GMT)

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