We’re perfectly fine with not being first. It’s about being the best. – Tim Cook
We’re perfectly fine with not being first. It’s about being the best.
Since the first quarter of 2020, capital expenditures (capex) among the largest technology companies have moved in sharply different directions. Microsoft’s capex is nearly eight times its 2020 level. Meta and Amazon are spending roughly six times their 2020 levels while Alphabet has more than quadrupled its outlays. Apple’s capex increased only about 1.3x over the same period. The hyperscalers are deploying capital at industrial scale to build AI infrastructure. Apple is not.
This scale of spending has reshaped their business models. Microsoft, Meta, Amazon and Alphabet are committing balance sheets to data centers, custom silicon, power agreements and networking capacity at a historic pace. Companies once defined by asset-light margins and strong incremental cash flow now operate with materially higher fixed investment intensity. Apple has not followed that path.
Year-to-date performance also offers a revealing contrast. Through Feb. 26, Apple was modestly positive at 0.4%. Microsoft was down 16.9%. Amazon declined 9.9%. Alphabet fell 1.8%, and Meta dipped 0.5%. The heaviest spenders are not leading in price. The shift is recent, but it is measurable.
The spending surge also alters capital allocation. In recent years, large share repurchases supported mega-cap equity prices, particularly at Apple. As hyperscalers commit unprecedented sums to infrastructure, those buybacks compete directly with reinvestment. Expanding capex several multiples over a short period assumes that returns will expand proportionally. Softer price performance alongside rising investment suggests that investors are beginning to test that assumption. We examined the durability of AI-driven capital spending in Blog 60; the market might now be stress-testing that same buildout through relative price action.
Major capital cycles tend to follow a familiar arc. Railroad construction in the 19th century, fiber deployment in the late 1990s and early cloud infrastructure all attracted heavy investment before revenue and utilization matched capacity. Capital was deployed well ahead of clear visibility into long-term returns. The distance between capital committed and returns realized can persist for years.
Apple stands apart in the chart. Its capex has increased only modestly while peers have multiplied theirs and committed balance sheet capital to data centers and custom silicon at scale. Earnings remain anchored in devices, services and ecosystem monetization rather than infrastructure buildout. The contrast in spending is clear, and recent relative performance aligns with it.
Relative performance between Apple and the hyperscalers now serves as a real-time signal. If the heavy spenders resume decisive outperformance, the market is endorsing the scale of the AI buildout. If Apple continues to hold up while peers expand capex aggressively, investors are assigning greater weight to capital discipline. The multiple will follow whichever model the market rewards.
Between the Lines is a weekly blog by DoubleLine Portfolio Managers Sam Garza, Joseph Mezyk and Quant Analysts Fei He, CFA and Sunyu Wang that breaks down topical macro and market issues. For questions or suggestions please e-mail us at betweenthelines@doubleline.com. The views and opinions expressed herein are those of the authors and do not necessarily reflect the views of DoubleLine Capital LP, its affiliates or employees.
