The artificial intelligence gold rush which has seen tech giants spend almost half a trillion dollars on cloud infrastructure is poised to undergo its most dramatic test to date as the ever-growing depreciation expenses and falling returns are poised to result in a spending apocalypse in 2026 that would eradicate AI stock prices and send investors scrambling to determine who will be spared by the coming capital spending apocalypse.
Spending boom cover-up looming slowdown
Global hyperscale spending on clouds is expected to exceed $445 billion by the 11 largest global hyperscale providers in 2025, a 56 percent increase year-over-year, and $582 billion by 2026, a 31 percent growth per year, according to AInvest. The total amount that Amazon, Alphabet, Meta Platforms, and Microsoft are anticipated to spend in 2025, 2026, and 2027 is expected to increase by 57 percent, 26 percent, and 454 billion dollars, respectively.
These four firms will occupy 77 percent of the world capital spending increase in 2025. There are many forces behind the rise in cloud expenditure, such as the current pace of artificial intelligence adoption and demanding infrastructure to facilitate data-sensitive applications.
Dell’Oro Group estimates it has increased to approximately one-third of total data center capital expenditure, with GPUs and custom AI accelerators becoming the sole major driver of growth. Hyperscale CSO vendors are on the frontline of vertically integrated solutions and custom architectures designed to maximize performance and reduce the cost of compute.
Analysts on Wall Street foresee the extreme deceleration
Analysts on Wall Street and elsewhere forecast that in 2026, the cloud computing spending boom that has driven many artificial intelligence stocks will fade out, according to Investors’ Business Daily. This is to say that AI stock investors might have to be more selective because cloud giants are reducing their investments in their enormous infrastructures. U.S. hyperscalers are more interested in investment returns and the effect of the increasing depreciation costs on their profits after three years of unprecedented growth, said Baron Fung, analyst at Dell’Oro Group.
Goldman Sachs predicts that cloud capital expenditures will reduce to 26 percent in the year 2026 compared to 64 percent in the year 2025. Morgan Stanley forecasts that the growth in cloud capital expenditure will reduce to 16 percent, as opposed to 56 percent. Evercore ISI will see its growth decelerate to 18 percent in 2026 against 64 percent in 2025. In the meantime, Dell’Oro forecasts 21 percent growth in 2024, compared with more than 50 percent in 2025.
Expense is compelled by pressure depreciation
Predicting the top 6 companies, including Apple, even the Wall Street analysts allude to the fact that cloud capital consumption will increase 19 percentage points in 2026 compared to an increase of 54 percent this year. And, expenditure will decelerate to 7 percent growth in 2027 and 5 percent growth in 2028, analysts foresee.
One of the accounting rules that is becoming a major concern to most tech giants is depreciation. Cloud computing companies acquire new data centers, servers, storage devices, and network devices. That AI infrastructure is regarded as a long-term asset on balance sheets. The depreciation costs increase when the useful life of the AI infrastructure becomes shorter, and this affects the profit margins.
Disparities in company-specific expenditure occur
The biggest tapering off is anticipated for Amazon and Google. In 2026, investments in capital across Amazon and Google should increase by approximately 11 percent. Cloud expenditure will remain high at Meta with 42 percent growth, compared to Microsoft, which sees spending grow 22 percent, and Oracle, which will see a growth of 21 percent.
The slowdown in cloud capital spending is an inflection point that is critical in the AI industry since technology giants are no longer interested in rapid growth but are moving toward profit maximization. As depreciation expenses continue to accumulate and investment returns begin to be questioned, the 2026 deceleration will help distinguish between sustainable AI companies and hype, and essentially alter the technology environment.
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