Morgan Stanley: Five Tech Companies’ 2028 Capital Spending Forecasts Revised Upward as Software AI Monetization Faces a Growth Test

Why do capital spending forecasts for the five major tech companies keep rising?

As of 30 October, Visible Alpha’s combined consensus forecast for 2028 capital spending by Microsoft, Alphabet, Amazon, Meta and SpaceX exceeded 1.5 trillion dollars, up 18% from the beginning of October; excluding SpaceX, the forecast rose 9%. On current forecasts, the five companies’ combined spending in 2028 will grow 11% from 2027.
A major source of the recent upward revision is SpaceX: its fourth-quarter capital spending forecast approximately doubled to 35 billion–40 billion dollars. Alphabet and Amazon maintained their 2026 guidance, Meta slightly narrowed and raised its range, while Microsoft lowered its forecast slightly because of delays in third-party capacity.
The combined consensus forecast for the five companies’ 2026 capital spending is 802 billion dollars, up 100% year over year; company commentary also points to continued large-scale investment in 2027. Morgan Stanley also notes that an increasing share of capital spending is financed through leases.

Microsoft offered a voluntary departure program to approximately 60 thousand employees, covering about 27% of its workforce in fiscal 2026; this is the number eligible, and the number who actually leave remains to be seen. Microsoft’s total headcount has been relatively stable since fiscal 2022, while revenue per employee has risen significantly.
Dassault Systemes says all of its 12 thousand engineers are using Cursor extensively, with slower headcount growth the most visible benefit. Temenos attributes 8 million–9 million dollars of an approximately 12 million dollar increase in earnings before interest and tax to AI and internal automation efficiencies, and is investing some of the savings in its product roadmap.
Morgan Stanley expects announcements of workforce reductions in the software industry to continue through 2027, as companies weigh operating flexibility, AI investment needs and profit targets.

SAP says AI migration tools can reduce migration workloads by up to 35%; four of its seven planned AI migration assistants are already being used in early customer projects. Morgan Stanley therefore sees near-term opportunities in cloud migration and data modernization, but believes large-scale AI adoption and monetization are more likely in the second half of 2027.
ServiceNow’s AI business is improving: the company raised its 2026 AI annual contract value target from 1.5 billion dollars to 1.7 billion dollars, and new AI annual contract value grew 65% year over year.
But overall growth has yet to accelerate accordingly. Morgan Stanley estimates that ServiceNow’s organic growth in remaining performance obligations at constant currency slowed from 19% in the second quarter to about 18% in the third; its fourth-quarter growth guidance of 18.5% was about 1.3 percentage points below market consensus. Although third-quarter subscription revenue met expectations and operating margin exceeded consensus by about 1.5 percentage points, the company’s shares still fell about 27% on the Thursday after results were announced.
Investors are watching whether AI products can drive overall growth, rather than merely replace spending on non-AI products that customers would otherwise have purchased.

Morgan Stanley expects global data center capacity to increase by 180 gigawatts over 2026–2030, at an annual growth rate of about 23%, led by the United States and China, with Europe lagging. Planning permits are becoming a new bottleneck, but electricity remains the biggest constraint.
The bank estimates that even with newer approaches to accelerating power supply, US developers could still face an electricity shortfall of about 33% by 2028. Overseas site selection must take into account both construction costs and ongoing electricity charges: in Western Europe, AI data center capacity costing about 175 euros per kilowatt per month may entail an additional electricity charge of about 150 euros, nearly doubling the customer’s total bill.