Weekly Market Update

No Let-up in Capital Expenditures

According to recent Q4 earnings calls from the top 4 AI hyperscalers (Amazon, Microsoft, Alphabet, and META), projections for 2025 capex spending have increased substantially to over $320 billion in combined AI capex spend, up significantly from $246 billion spent in 2024.

February 19, 2025 5 min read

Dane Smith

Head of North American Investment Strategy & Research

Chris Carpentier, CFA, FRM

Senior Investment Strategist

Maria Nikitanova

Investment Strategy and Research

DeepSeek’s efficiency breakthrough significantly reduced the computational and energy demands of AI models. As investors continue to understand the implications of such improvements, one conclusion seemed unavoidable: increased efficiency would lead to lower capital expenditures in the AI space. If companies could achieve the same performance at cheaper costs, current estimates for CAPEX had to be excessive . . . Right? Not according to “Jevons Paradox.” The core idea is more efficiency leads to broader adoption, not less, and can increase demand. The theory is particularly relevant to the AI sector as demand for compute is already outpacing supply.

Are there signs for reduced capex spending since the emergence of Deepseek? According to recent Q4 earnings calls from the top 4 AI hyperscalers (Amazon, Microsoft, Alphabet, and META), projections for 2025 capex spending have increased substantially to over $320 billion in combined AI capex spend, up significantly from $246 billion spent in 2024.

AI is already the most coveted, sought-after investment since the internet boom. The cost of missing out is so severe that even an opportunity to massively reduce capex has been outright ignored as companies race to secure their position in the future of AI. Despite the initial selloff, we believe the AI story remains well supported and the companies best positioned to monetize it.

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