Bank of America projects a 50% rise in AI-related capital spending by top cloud providers over the next three years.
Bank of America revised its hyperscaler capital expenditure outlook, projecting spending to exceed $860 billion in 2026, an 80% year-over-year increase. The forecast extends to $1.2 trillion in 2027, reflecting a 38% rise from 2026 levels.
The surge is driven by strong multi-year spending commitments from Alphabet, Microsoft, Amazon, and Meta, with compute supply remaining constrained. Customer cloud commitments across the top four providers reached $2.3 trillion, up 16% quarter-over-quarter, signaling long-term demand.
Free cash flow margins are expected to turn negative, dipping to -5-6% in 2027-28, compared to historical levels of 15-20%. However, AI and cloud revenue growth, including AWS’s $25 billion annual AI and chip sales, may offset near-term financial pressures.