AI hyperscalers blowing the doors off expected capex

For investors, selectivity, valuation discipline more important than ever

At the start of 2026, investors entered the year with a mix of optimism and uncertainty. While outlooks were published and geopolitical risks remained elevated, one theme continued to shape market narratives and investor focus: artificial intelligence.

As the “Magnificent Seven” report earnings, AI-related themes were increasingly supported by hard data. Rather than signaling speculative excess, results reflected real demand, accelerating usage, and expanding monetization, albeit alongside rising capital intensity. We are increasingly seeing how AI is directly influencing capital allocation decisions across the world’s largest technology platforms.

Alphabet, Meta, Microsoft, and Apple all delivered results that highlighted both the opportunities and tradeoffs of the current AI cycle. Alphabet demonstrated resilience across Search, YouTube, and Cloud, with AI contributing across multiple business lines while margins proved resilient despite elevated investment.

In 2026, Google estimated capital spending to be in the range of $175 billion to $185 billion, up roughly double year-over-year, soaring above street estimates, with most of its capital spending going toward artificial intelligence cloud infrastructure. As CEO Sundar Pichai noted, “We’re seeing our AI investments and infrastructure drive revenue and growth across the board.” Meta delivered one of the clearest examples of AI leverage, with improved ad targeting driving higher engagement and conversion, supporting increased forward capital spending.

Taken together, these results highlight the scale of investment required to support AI growth. Hyperscaler capital expenditure expectations continue to move higher as enterprise adoption accelerates. Increasingly, power availability, data center development, and grid infrastructure are emerging as gating factors, pulling energy, utilities, and enabling infrastructure further upstream in the AI value chain.

This highlights an important distinction between AI adopters such as Meta, Alphabet, and Amazon and AI infrastructure providers. The latter includes semiconductor manufacturers, data center hardware suppliers, and power and grid infrastructure companies who are benefitting from the rising capital spend.

We believe the takeaway from January is that AI is no longer a future concept, it is a present economic force. While expectations remain elevated and market concentration has increased, the path forward increasingly favors selectivity, valuation discipline, and a focus on durable business models, an approach we believe is well suited to our investment framework.

Aman Budhwar, CFA, is a Portfolio Manager in the Pender Equity Investment Team at PenderFund Capital Management. Excerpted from the Pender Pender US Small/Mid Cap Equity Fund Commentary, January 2026. Used with permission.

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