Alphabet, Amazon, Meta and Microsoft: The four largest US hyperscalers spent more than $200 billion on capital expenditure in the latest quarter, up from $113 billion a year earlier, and have signalled higher spending into the December quarter. Goldman Sachs expects hyperscaler capital expenditure to nearly double to about $800 billion this year and reach $1.2 trillion in 2027. Several of the largest spenders reported negative free cash flow in the third quarter.
Equity markets are pricing financing strain, over-ordering and a possible demand cliff. The latest broker research, however, still models multi-year earnings growth and, in several cases, describes forward valuations as trough or near-trough. That has made the conversion of AI capex into durable revenue the central test for the group.
Meta carries one of the stronger research cases among the hyperscalers. Mizuho raised its target to $950 from $750, citing stronger confidence in Muse monetisation and 24% revenue growth in 2027. Bloomberg’s average target stands at $847, with 91% of analysts rating the stock Buy.
The caveat is capital intensity. Analysts acknowledge potential equity-raise risk in early 2027 if AI infrastructure spending continues to outrun free cash flow. The longer-term thesis (advertising plus AI-driven engagement) remains intact in the notes, but the financing question has become harder to ignore.
Microsoft’s research case remains centred on Azure and AI services. The stock holds 91.5% Buy ratings and a Bloomberg average target of $637, implying more than 20% upside.