Amazon, Alphabet, and Microsoft are set to spend nearly $600 billion combined on data center capacity this year as cloud demand outpaces supply. Taiwan Semiconductor Manufacturing, which fabricates the logic chips behind that build-out, stands to capture much of that spending.
Amazon, Alphabet, and Microsoft are the world's three biggest cloud computing providers, and each is raising its spending on computing capacity this year. Amazon is on track to spend $220 billion, Alphabet expects to spend about $200 billion, and Microsoft has forecast $175 billion. Combined, that comes to $595 billion.
Cloud demand keeps outrunning supply
The spending follows a surge in cloud revenue tied to artificial intelligence, as companies without in-house computing capacity turn to Amazon Web Services, Microsoft Azure, or Google Cloud instead of building their own data centers. During Amazon's last earnings call, CEO Andy Jassy said the company would not have enough capacity to meet demand in 2026, and that 2027 is shaping up the same way. As a result, contracts for capacity that won't be available until 2028 are already starting to appear.
All three cloud divisions posted sharp revenue growth last quarter, with Google Cloud rising 82%, Azure increasing 43%, and AWS rising 37%. Growth at that pace is why the three companies are pushing capital expenditures toward $600 billion this year.
TSMC fabricates the chips behind the build-out
Nearly every logic chip powering these data centers is designed by a chip company but fabricated elsewhere, and Taiwan Semiconductor Manufacturing is the leading maker of those logic chips. TSMC counts nearly every major AI chip company as a client, so as the three cloud providers raise their capex budgets, most of the underlying chips are likely to come from TSMC's foundries.
Motley Fool analyst Keithen Drury points to TSMC's shares trading around 10% below their all-time high as the AI build-out is expected to continue through at least the end of the decade.
Sources: The Motley Fool, Yahoo Finance
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