AI Stocks Face 2026 Conundrum As CapEx Growth Cools

The cloud computing spending boom that has powered many artificial intelligence stocks will taper off in 2026, say analysts on Wall Street and elsewhere. That means investors in AI stocks may need to be more choosy as cloud titans downshift.

"After three years of unprecedented growth, U.S. hyperscalers are increasingly focused on investment returns and the impact of rising depreciation expenses on profitability," said Baron Fung, analyst at Dell'Oro Group.

In 2025, spending by the top five cloud computing firms is expected to near $400 billion. Next year, some cloud providers could pare spending more than others.

For example, data center spending at Meta Platforms (META) might stay elevated compared with Amazon.com (AMZN), Microsoft (MSFT), Alphabet (GOOGL) and Oracle (ORCL). So that could benefit Meta's suppliers of AI cloud infrastructure.

Meta Leads In 2026; Google And Amazon Pull Back

Estimates vary based on which companies are included and definitions of cloud infrastructure. But the trend in consensus estimates is clear, according to Visible Alpha data.

Including Apple (AAPL), Wall Street analysts predict cloud capital spending for the top six companies will grow 19% in 2026 vs. 54% this year. And, spending will slow to 7% growth in 2027 and 5% growth in 2028, analysts project.

Goldman Sachs forecasts that cloud capital spending growth will slow to 26% in 2026 from 54% in 2025. Morgan Stanley predicts cloud capital spending will taper off to 16% growth from 56%.

Evercore ISI expects a slowdown to 18% growth in 2026 from 64% in 2025. Meanwhile, Dell'Oro estimates 21% growth next year, down from well over 50% in 2025.

In a recent report, Goldman Sachs said: "Hundreds of billions of dollars in AI capex investment have continued to support AI infrastructure stocks. In particular, the public U.S. AI hyperscalers (Amazon, Google, Meta and Microsoft) have made $312 billion in capex investments during the past four quarters. … The inevitable slowdown in capex growth poses a risk to the valuation of AI infrastructure stocks."

Amazon and Google are expected to taper off the most. Capital spending at both Amazon and Google is expected to grow about 11% in 2026. Meta's cloud spending will still be robust at 42% growth, while Microsoft outlays increase 22% and Oracle's spending rises 21%.

Why Depreciation Matters

Depreciation, an accounting rule, is a growing issue for many tech giants. Cloud computing companies purchase new data centers, servers, storage devices and networking equipment. That AI infrastructure is treated as long-term assets on balance sheets. As the useful life of the AI infrastructure declines, depreciation expenses go up and impact profit margins.

For some observers, depreciation trends are a big issue that investors in AI stocks need to monitor.

In the June quarter, both Microsoft and Google reported better-than-expected cloud revenue growth while Amazon lagged.

Praetorian Capital, in a blog post, claimed that hyperscalers will need to generate 10 times current revenues from their data centers just to cover the annual depreciation costs of AI infrastructure.

"Simply put, at the current trajectory, we're going to hit a wall, and soon," said the Praetoriam blog. "There just isn't enough revenue and there never can be enough revenue. The world just doesn't have the ability to pay for this much AI. It isn't about making the product better or charging more for the product. There just isn't enough revenue to cover the current capex spend."

AI chipmakers such as Nvidia (NVDA) and Broadcom (AVGO) have been among the hottest AI stocks. Networking companies like Arista Networks (ANET) and Credo Technology (CREDO) also have been beneficiaries of the heightened spending.

A new wave of AI-centric cloud services companies led by CoreWeave (CRWV) are renting out Nvidia GPU-equipped servers. And equipment companies, such as Vertiv Holdings (VRT), and power suppliers have benefited from the cloud capital spending boom.

Short-seller Jim Chanos in a recent tweet targeted CoreWeave, citing data center economics and depreciation. He argued that CoreWeave is overestimating the life of Nvidia GPUs.

AI Stocks Weather DeepSeek Emergence

In early 2025, AI stocks sold off on the emergence of China-based AI model developer DeepSeek. Its progress in building low-cost AI models fueled fears that companies would reduce data center infrastructure spending. That didn't happen in 2025, but worries linger.

One bullish view is that AI spending will shift to processing AI apps.

Some companies — notably OpenAI, Meta and Elon Musk's xAI — maintain plans to build massive data centers that connect over 100,000 computer servers in clusters.

Nvidia, a bellwether for AI stocks, maintains a positive long-term view.

"We see $3 trillion to $4 trillion in AI infrastructure spend by the end of the decade," Chief Financial Officer Colette Kress said on the company's July-quarter earnings call with analysts.

She added: "We expect annual AI infrastructure investments to continue growing, driven by several factors — reasoning agentic AI requiring orders of magnitude more training and inference compute, global buildouts for sovereign AI, enterprise AI adoption, and the arrival of physical AI and robotics."

Follow Reinhardt Krause on X, formerly Twitter, @reinhardtk_tech for updates on artificial intelligence, quantum computing cybersecurity and cloud computing.

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