Zuckerberg, Musk step up AI arms race with $155 billion spending blitz

Big Tech is unleashing a massive AI spending spree, with Meta and Tesla doubling down on capital expenditure even as chip shortages and bubble fears grow

Meta Platforms Inc. will double capital spending to as much as $135 billion this year, an all-in bet on artificial intelligence as the US tech giants battle it out for supremacy in the next wave of technological advancements. 

Tesla Inc. will spend $20 billion this year on pursuits including AI, self-driving vehicles and robotics - almost double Wall Street estimates — and plow another $2 billion into Chief Executive Officer Elon Musk’s xAI startup. Musk also said Tesla needs to build its own semiconductor factory. 

Investors should look forward to “a major AI acceleration” that’s been brewing within the tech industry for over a year, Meta CEO Mark Zuckerberg said on Wednesday’s earnings call. After an overhaul of the company’s AI program in 2025, Zuckerberg said Meta will soon release new models and products. The stock rose 7.9% after results beat expectations and Meta’s strong ads business convinced investors its planned splurge is viable. 

 

Microsoft Corp.’s results highlighted the fragility of investor sentiment around AI and its funding. The stock dropped 6.5% in premarket trading after the company reported quarterly capex numbers above Wall Street estimates, yet barely met expectations for its Azure cloud business.  

Silicon Valley’s spending spree rippled around the world. Hardware providers like Samsung Electronics Co. and SK Hynix Inc. — two makers of the memory chips that go into Nvidia Corp.’s essential AI accelerators as well as data center servers — reported profits that grew several-fold. ASML Holding NV, the sole provider of the cutting-edge lithography machines needed for advanced semiconductors — also smashed estimates. 

Ratcheting spending by hyperscalers reflects growing use cases for AI, said Sanjeev Rana, head of research at CLSA Securities Korea, adding that “the companies are spending real money on real stuff.”  

“We are in unchartered territory in terms of valuations, share prices, the demand cycle,” he said. “Everything is unprecedented.”

At the same time, that enormous demand is worsening a global chip demand-supply imbalance that threatens to disrupt industries from smartphones and electronics to car-making. 

While the appetite for Nvidia and Advanced Micro Devices Inc. accelerators needed to develop and operate AI has long outstripped supply, investors are growing increasingly concerned about a similar deficit in more basic memory.  

The availability of semiconductors will be a big bottleneck to growth. Musk said earlier this month that he’s weighed building his own factory for logic and memory chips and packaging for Tesla, in a podcast interview with Peter Diamandis, founder of the X Prize Foundation. 

“We’re going to hit a chip wall if we don’t do the fab,” Musk said. “We’ve got two choices: hit the chip wall or make a fab.”

Higher spending levels also increase the risk if demand for AI and its infrastructure weakens. After stocks increased last year, shareholders have been quick to sell when tech companies show signs that growth is faltering.  

Explainer: Why Fears of a Trillion-Dollar AI Bubble Are Growing 

Samsung’s shares fell more than 1% in after-market trading in Seoul, according to prices from Nextrade. That’s despite the chipmaker’s plans to start shipments of its next-generation high-bandwidth memory, HBM4, in February — a key step in its bid to catch up with SK Hynix in the lucrative segment. SK Hynix’s stock price was little changed. 

In Asia, attention is on the race for leadership in next-generation HBM4, which is set to be integrated with Nvidia’s upcoming flagship Rubin processors. Samsung is close to obtaining certification from Nvidia for the latest version of its AI memory chip.