Google and Microsoft capex misses raise AI buildout cost concerns

Microsoft and Alphabet reported capital expenditures below analyst estimates, raising concerns about the cost of the AI infrastructure buildout. Microsoft cut its annual capex forecast to $170 billion from $175 billion, while Alphabet held guidance at $195 billion to $205 billion. Shares of neocloud providers CoreWeave, Nebius, and IREN fell after the reports, along with Oracle. Microsoft cited delays from third-party GPU providers pushing capacity to the first half of 2027, while Alphabet noted outside computing power arrived late in the third quarter. Alphabet shares dropped about 10% in extended trading on missed earnings and negative free cash flow exceeding $9 billion. The slowdown is not imminent, as hyperscaler capex is expected to top $1 trillion next year. Microsoft sees spending accelerating in early 2027 due to higher component costs. Neoclouds face financing challenges without investment-grade ratings, and Gartner predicts 80% will be absorbed or cease operations by 2030. Amazon reports Thursday.