The rapid increase in AI investments is fundamentally changing the business models of the world’s largest technology companies. Amazon, Alphabet, Microsoft, and Meta are becoming among the world’s largest physical asset holders by investing billions of dollars in software and digital services, as well as data centers, servers, and network infrastructure.

According to an analysis by Nikkei Asia, the total value of real estate, factories, and equipment (PP&E) assets owned by these four companies reached $1.46 trillion as of the end of June. This figure represents a 140% increase in the last three years, while the companies’ total PP&E assets increased by 48% in just the last year.

Tech giants surpass oil companies

Amazon, with the highest physical assets among the four companies, stands out with a value of $538.7 billion. Amazon’s physical assets have nearly doubled in the last three years, and last year the company surpassed Saudi Aramco, which was the world’s largest non-financial company.

Alphabet and Microsoft’s PP&E assets also exceeded $330 billion, surpassing giant oil companies such as Exxon Mobil and PetroChina. Although Meta is the smallest company in the group in terms of physical assets, its investments are growing rapidly, and the total value of its physical assets is said to be more than double that of Toyota.

AI data centers are accelerating investments

Behind the huge increase in the physical assets of technology giants lies massive investments in artificial intelligence infrastructure. Data centers, particularly advanced servers and network equipment, represent a significant portion of companies’ capital expenditures.

More than 70% of Alphabet’s PP&E assets consist of technical infrastructure such as servers, network equipment, land, and data center buildings. Amazon, Alphabet, Microsoft, and Meta’s combined capital expenditures are projected to reach $760 billion in 2026, representing an increase of approximately 85% compared to the previous year.

Companies that previously relied heavily on software, advertising, and digital services are now forced to make massive investments in power, data center, server, and network infrastructure to support AI services. This is causing a significant increase in the companies’ off-balance-sheet financial liabilities.

As of the end of June, these four companies had approximately $2.3 trillion in off-balance-sheet liabilities, including long-term equipment purchase agreements and lease commitments. While this figure is said to have increased more than fourfold compared to a year ago, these liabilities are classified as unknown debt because they can eventually transform into physical assets.

High infrastructure costs may put pressure on profits

Investments in AI infrastructure may generate significant revenue from cloud computing and AI services in the future. However, massive data center investments also increase companies’ operating costs, and depreciation expenses rise as new servers are commissioned.

The fact that AI hardware generally has a lifespan of about five years causes companies to account for their investments as expenses in a short period. Amazon, Alphabet, Microsoft, and Meta’s total depreciation expenses in the April-June period reached $44.5 billion, which corresponds to approximately one-third of the four companies’ total operating profit.

According to market estimates, the annual depreciation expenses of the four companies could reach approximately $360 billion by 2028. What are your thoughts on the long-term impact of these massive infrastructure investments on the companies’ profitability?