Big Tech’s massive AI spending spree has some investors nervous, but Wedbush analyst Dan Ives is not buying the panic. He argues that Microsoft $MSFT ( ▼ 2.22% ) and Alphabet $GOOGL ( ▼ 2.38% ) are making the right move by pouring hundreds of billions into AI infrastructure, even if it pressures near term cash flow.
Together, the two companies are expected to spend roughly $300 billion on property and equipment this year as they race to build out data centers and AI capacity.
Building the AI Backbone of the Cloud
Ives says this is not reckless spending. Instead, he sees both companies reshaping cloud economics around AI first workloads that create higher switching costs and deeper customer lock in.
AI driven services often come with longer contracts and more embedded infrastructure, which can translate into more stable and higher value revenue streams over time. That, in his view, justifies the heavy upfront investment.
Short-Term Noise, Long-Term Payoff
Near term, the spending does make free cash flow look messy. But Ives believes the companies that invest early and at scale will be in the strongest position once AI workloads mature and utilization improves.
As more customers move critical operations onto AI powered cloud platforms, he expects pricing power and ecosystem control to follow.
Betting Big to Stay on Top
For Microsoft $MSFT and Alphabet $GOOGL, the message is clear. Spend big now, secure infrastructure leadership, and turn today’s capex into tomorrow’s durable growth engine.
Ives’ take is that the AI arms race is not a place to be cautious. It is a place where scale and speed could define the next era of tech dominance.