The race for new, upgraded data centers to handle the artificial intelligence boom has pushed the world's top technology giants to outpace oil majors in capital expenditures, according to the Wells Fargo Investment Institute.
GOOG Alphabet Company,
Google,
Amazon.com AMZN,
Meta Platforms Inc. Meta,
Microsoft Corporation (MSFT),
The four largest cloud infrastructure companies by market capitalization have begun making much larger capital expenditures than their oil industry counterparts since the outbreak of the pandemic in 2020.
Large cloud infrastructure companies have been spending more on upgrading or acquiring new facilities than their oil industry counterparts since 2020.
FactSet and the Wells Fargo Investment Institute
The largest “hyperscale” cloud companies have announced combined capital expenditures of about $140 billion in 2023, while the four largest global integrated oil companies by market cap – BP BP,
chevron CVX,
ExxonMobil XOM,
Shell PLC SHEL,
– It was closer to a combined $80 billion.
Crude oil prices CL00,
BRN00,
It rose to above $100 in March 2022 in the wake of pandemic shocks and Russia's war in Ukraine, before supply cuts by major oil producers pushed prices down to $80 a barrel. When energy costs rise, oil companies have historically increased capital expenditures to boost crude oil production.
However, Larry Pfeffer, an industrials equity sector analyst at the Wells Fargo Investment Institute, expects spending by the four largest large-scale technology companies to reach nearly $200 billion annually by 2025, a boom that will have “ripple effects.”
Data centers have been a niche part of commercial real estate for years, with needs growing in the wake of the coronavirus crisis and with the release of ChatGPT in late 2022, especially for newer facilities that can handle the voracious power demand that AI requires. Focused clients.
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