The $600 Billion Question: America Is Buying AI, and the Receipts Are In

Wall Street spent Wednesday evening doing something it had not attempted since the last earnings season: reading the terms and conditions.

1. The Bill

Alphabet reported earnings that missed expectations — $2.12 a share against the roughly $3.01 Wall Street had rehearsed — while confessing that its quarterly spending on artificial intelligence had climbed past $50 billion. The stock fell 7% after hours, then about 10% in early Thursday trading, a drop that set up what may be the largest single-day loss of market value in the company’s history. All of which the company insists is normal, for a company that printed money for a decade.

2. The Argument

The three largest American cloud companies — Google, Microsoft, and Amazon — are on pace to spend some $600 billion on AI this year, a figure economists now say out loud the way people in a hospital hallway say a number they were told not to say out loud. Their combined backlog of contracted cloud business approaches $1.7 trillion, which is either a fortune or a pile of letters of intent, depending on how much you trust lawyers with punctuation.

The argument was never that the spending is unreal. Everyone agrees the spending is real. The argument is about what the spending is real about. For three years, the market agreed to a simple trade: pay now, marvel later. Wednesday was the first evening a majority of the market asked to see the marvel.

That is not a selloff. That is an audit.

3. The Mood

The Federal Reserve, for its part, held rates steady Wednesday with two hawkish dissents, which is the central bank’s way of saying it heard the argument but would like minutes before taking sides. America’s first estimate of third-quarter gross domestic product is due Thursday morning, along with September inflation data, along with a decision from the European Central Bank, along with earnings calls from Amazon, Intel, and Eli Lilly — an unusual amount of homework for one calendar day.

Consumers, meanwhile, remain unbothered in the way consumers remain unbothered: by comparing prices. A quarter that has cost the tech industry half a trillion dollars still delivered the one product Americans actually touch — slightly more expensive chocolate at the drugstore.

The believers are unfazed. A venture investor in San Jose, who asked to be identified as a believer and not by name, said the misses were “the sound of a country finally building something again,” a sentence that would be indistinguishable from a 1906 railroad bond pitch if not for the word “finally,” which in Silicon Valley has always meant “mine.”

The skeptics are not unfazed. They are doing math, which in this industry has historically been treated as an act of aggression.

At press time, none of the three companies had returned calls. One had released an earnings call. It is not believed to have gone well.