Goldman Sachs expects top five US cloud providers to spend over $1.2 trillion on AI next year

Goldman Sachs strategists expect the five largest US hyperscale cloud providers — Amazon, Alphabet, Microsoft, Oracle and Meta — to increase their AI infrastructure spending by more than 50% next year, reaching $1.2 trillion. That is above Wall Street's consensus estimate of $1.1 trillion.

The Goldman team says that to earn back these investments, the five companies would need to generate about $300 billion in AI revenue each year over the coming years. Next year's capital spending as a share of GDP would be the highest of any tech investment cycle since the railway boom of the late 19th century.

The five companies are expected to spend $800 billion on AI capacity this year. Their capital spending now exceeds operating cash flow, increasing reliance on debt and equity financing. Power, labor and memory shortages, along with data center construction limits, could constrain expansion.

Goldman expects capital spending growth to slow from nearly 100% this year to 54% next year and 12% by 2028. Current estimated AI revenue is still not enough for the five companies to recoup their investments, but cloud revenue growth has risen from 25% in 2024 to 48% in the second quarter of this year.