Every quarter, I look at the capital expenditure numbers coming out of the major cloud providers, and every quarter, they manage to surprise me. This time, though, we’ve crossed into territory that’s genuinely hard to process. The five biggest US cloud and AI infrastructure providers (Microsoft, Alphabet, Amazon, Meta, and Oracle) have collectively committed to spending between $660 billion and $690 billion on capex in 2026, nearly doubling what they spent just a year ago.

Amazon leads the pack with a projected $200 billion, most of it directed at data centers and AI compute. Alphabet has committed $175 to $185 billion, up from $91 billion in 2025. Microsoft is tracking toward $120 billion or more, having already spent $37.5 billion in a single quarter. Meta is at $115 to $135 billion, and Oracle is targeting roughly $50 billion. For context, four companies alone plan to invest about $630 billion, a 62% increase from the record $388 billion they spent in 2025.

What are they buying? Mostly chips, buildings, and electricity. The spending splits across the AI data center stack: GPUs and custom accelerators such as Google’s Tensor Processing Units and Amazon’s Trainium, the physical data centers themselves with their liquid cooling and high-density floors, and often the power infrastructure to run it all, including power purchase agreements and even on-site gas-fired generation where the grid can’t keep up. Roughly two-thirds of the money goes to compute, and one-third goes to facilities, power, cooling, and networking, with the power share rising every quarter.

Where the market is heading

My take on the market is that we’re in the steep part of a demand curve that has a few more solid years left in it. Short-term demand over the next two years is already firm. Every hyperscaler reports being supply-constrained rather than demand-constrained, and Microsoft is sitting on an $80 billion backlog of Azure orders it can’t fulfill, largely because of power availability. Enterprises are panic-buying cloud capacity and computing gear right now because they’re convinced the AI boom will leave the unprepared behind, and they want their infrastructure in place so they can take advantage of whatever form the transformation takes. I get it. Nobody wants to explain to their board in 2028 why they spent 2026 waiting in line.

This means hardware vendors such as Dell, HPE, and IBM, along with the hyperscalers themselves, are going to see sustained growth as long as the demand continues. Some of it is real, and some of it is fear driven, but for the vendors, it all spends the same. The shortages enterprises are seeing today for processors and RAM, along with the associated price increases and stretched lead times, will most likely persist through that window because global silicon and memory supply is being absorbed by AI clusters faster than the manufacturers can expand it.

But my long-term forecast is deliberately less rosy than the providers’ own. The build-out cycle runs three to four years from commitment to full utilization. A lot can change in the AI market in that time. Model efficiency improvements could slash compute requirements per unit of output. Enterprises may discover that their AI workloads don’t justify the cloud spend once the novelty fades. Competitive dynamics could compress pricing. By 2028 and 2029, I expect the growth rate to be real but not at the scale builders assume today, and I expect the industry to carry the weight of capacity committed in the panic phase of 2026.

Are vendors overbuilding?

Here is where I part ways with the prevailing wisdom, and where I think we need some disciplined skepticism. The thinking right now is that for every bit of data center capacity you build, someone will use it, if not the hyperscaler that owns it, then some other tenant. Given Microsoft’s $80 billion backlog, that logic holds for the near term.

But I’ve been around long enough to be suspicious of “this time is different” arguments. I watched the fiber overbuild in the late 1990s, and I watched the first cloud buildout get ahead of itself as well. The concern is that the cloud providers are getting out over their skis, building capacity for demand that may not show up at the scale they’re projecting. The revenue those investments depend on is largely speculative. If AI adoption progresses more slowly than anticipated, or if efficiency gains reduce the compute required per workload faster than expected, the return on this spending could disappoint badly. There is also the uncomfortable possibility that a meaningful share of today’s demand is circular: Enterprises and vendors may be panic-buying capacity from each other in a stack of commitments that may never consolidate into actual sustained workloads.

By the time these data centers come online—and we’re talking about capacity committed now for delivery in 2027—the growth may not be at the scale the builders are expecting. I expect many of the data centers being committed now won’t be utilized at the rates people are assuming today for 2029. That’s not a prediction of collapse. It’s an acknowledgement that the industry has seen a similar pattern before in fiber, colocation, and the first cloud buildout itself.

Advice for enterprise buyers

If you’re running enterprise IT, this cycle cuts both ways. In the near term, you’re facing higher prices, allocation limits, and longer lead times for processors, RAM, and cloud capacity. Budget accordingly, lock in what you genuinely need, and resist buying out of the fear that drives the very shortages you’re suffering from.

But in the next few years, the picture flips. Overbuilt supply means lower prices. If the providers overshoot, then cloud rates soften and less expensive data center space becomes available for enterprises that need it, including capacity for your own AI ambitions at prices that would be unthinkable today. The overbuilding that will burn the hyperscalers’ investors will create a bargain for their customers.

The playbook I recommend is the one I’ve always recommended. Architect for the cloud on your own terms, stay out of long-term capacity commitments you can’t justify with current demand, and let the providers take the utilization risk. They’re betting hundreds of billions that the demand curve keeps climbing. You don’t have to make the same bet to benefit. The oversupply, if it comes, will find you, and at a price you’ll like a lot better than today’s.