Capex

In short

Capex, short for capital expenditure, is money a company spends on long-lasting physical assets such as buildings, servers and equipment. In AI it mostly means spending on data centres and the chips inside them.

Also called: Capital expenditure, Capital expenditures, CapEx
Topic: The AI business
Level: Beginner

Accountants separate spending that is used up straight away, like salaries or electricity, from spending on things a business will use for years. Under the international accounting standard IAS 16, property, plant and equipment are tangible items used to produce goods or services and expected to be used during more than one period¹. Buying them is capital expenditure.

Capex does not hit profits all at once. The cost goes on the balance sheet and is depreciated, a slice at a time, over the asset's useful life. Alphabet, for example, starts depreciating equipment only when it is ready for use².

Those useful-life choices matter a lot for AI hardware. Amazon cut the assumed life of some servers and networking kit from six years to five from January 2025, citing the faster pace of technology, especially in AI³. Meta went the other way, extending most servers and network assets to 5.5 years, which it said cut 2025 depreciation by $2.92 billion⁴.

The sums are now very large. Alphabet spent $91.4 billion on capital expenditures in 2025, up from $52.5 billion in 2024, mainly on technical infrastructure for AI². Meta expects $130 billion to $145 billion of capex in 2026 to support its AI efforts and core business⁵.

Capex is not the same as running costs. The electricity and staff needed to run a data centre are operating expenses, even though the building and servers are capex.

Example

When Alphabet reports a quarter, investors look at the capex line in its cash flow statement. In the three months to 30 June 2026 it was $44.9 billion, which the company said mainly reflected investment in technical infrastructure⁶.

Why it matters

Capex shows how much big tech is betting on AI before the revenue arrives. It is the number behind most talk of an AI spending boom or bubble.

Questions people ask

What is the difference between capex and opex?

Capex buys assets a business will use for more than one year, such as servers or buildings, and is spread over their life through depreciation¹. Opex, operating expenditure, covers day-to-day costs like wages, rent and electricity, which are charged against profit when they happen.

Why is AI capex so high?

Training and running AI models needs huge numbers of specialised chips housed in data centres with large power supplies. Alphabet and Meta both say their rising capex is driven by AI infrastructure²⁵.

Does capex reduce a company's profit?

Not immediately. The cash leaves the business straight away, but profit is reduced gradually through depreciation over the asset's useful life. That is why changes to assumed server lifespans, like Amazon's and Meta's in 2025, move reported profits³⁴.

Related terms

Sources

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