Right Horizon

Capital Intensity Will Reprogram Big Tech Values

In 2025, the landscape of major technology companies is undergoing a transformative shift. Giants like Microsoft, Alphabet (Google), Amazon, and Meta are transitioning from traditionally asset-light business models to capital-intensive operations. This change is primarily driven by the burgeoning demands of artificial intelligence (AI) development, which necessitates substantial investments in data centers and specialized hardware.

Capital expenditures (capex) for these firms have surged dramatically, reaching approximately $320 billion in 2025—a 13-fold increase over the past decade. For instance, Microsoft's capex now constitutes nearly a third of its sales, leading to a decline in returns on invested capital from 80% in 2021 to less than 40% in 2025.

While these hefty investments are poised to fuel future growth, they also bring challenges. The increased capital intensity is impacting profitability and altering the high-return expectations that investors have traditionally held for tech firms. The success of this strategic pivot hinges on the effective adoption of AI technologies that can significantly reduce labor costs and enhance capabilities.

However, there's an inherent risk of underperformance. If the anticipated benefits of AI investments fail to materialize, investors may reconsider their positions, especially as capital spending leads to growing depreciation and amortization, affecting future earnings.

This evolution underscores a critical juncture for Big Tech: the imperative to invest heavily in AI infrastructure or risk stagnation in a rapidly advancing technological landscape.

Keywords: Big Tech, Capital Intensity, AI Investments, Microsoft, Alphabet, Amazon, Meta, 2025 Tech Trends