What Wall Street’s Biggest Bank Is Quietly Saying About The Biggest AI Capex Spenders Alex Sirois Thu, October 8, 2026 at 12:45 PM EDT 4 min read MSFT -1.21% BAC -0.94% AMZN -1.78% Explore stocks on Coinbase Trading disclosure Trading disclosure The above button links to Coinbase. Yahoo Finance is not a broker-dealer or investment adviser and does not offer securities or cryptocurrencies for sale or facilitate trading. Coinbase pays us for certain activity generated through this link. Prices displayed are informational.
Azure grew 43% and Microsoft 365 Copilot crossed 30 million paid seats, while AWS posted 37% growth, marking its fastest pace in 18 quarters.
Bank of America raised its Big Tech capex forecast to $860 billion in 2026 and nearly $1.2 trillion in 2027.
Microsoft generated $19.6 billion in free cash flow last quarter; Amazon's trailing free cash flow sits at -$7.6 billion.
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Bank of America (NYSE:BAC) raised its Big Tech capex forecast to $860 billion in 2026 and nearly $1.2 trillion in 2027. Investors are considering the returns on that spending. The best test comes from Microsoft (NASDAQ:MSFT) and Amazon (NASDAQ:AMZN), each building AI with different partners and chips.
Microsoft's fiscal Q4 revenue rose 17.8% to $90.01 billion. Azure grew 43% and passed $100 billion in annual revenue. Nearly 90% of Microsoft Cloud revenue came from customers outside frontier model companies. Microsoft 365 Copilot exceeded 30 million paid seats. CFO Amy Hood said: "Demand continues to exceed available supply."
AWS revenue rose 37% to $42.23 billion, its fastest growth in 18 quarters. CEO Andy Jassy said the AI and chips businesses "each eclipsed run rates of more than $25 billion." Anthropic and OpenAI have both made multi-year, multi-gigawatt commitments to Trainium, Amazon's own AI chip. I would discount the $5.75 GAAP EPS, though. A $53.4 billion one-time gain on the Anthropic stake inflated it.
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Satya Nadella treats AI models as interchangeable parts: "The models are an input, not some extraction of the knowledge of the enterprise." Copilot moves to per-seat-plus-consumption pricing. CPUs and GPUs are short-lived assets, so Microsoft can slow purchases if demand cools.
Amazon plans its expansion over decades. Servers break even in a little less than three years, most AI capacity is contracted for at least five-year terms, and data centers earn revenue for 30-plus years. Its trailing free cash flow is -$7.6 billion, while Microsoft generated $19.6 billion in a single quarter.
Microsoft expects Azure to grow about 45% in constant currency in fiscal Q1. Watch whether new capacity gets "quickly monetized." For Amazon, monitor Q3 operating income guidance of $22.5 billion to $26.5 billion and any move to sell Trainium chips outside AWS. Microsoft's fiscal 2027 EPS estimate drew 21 upward revisions against 8 downward over 30 days. Amazon's 2027 estimate saw 4 up and 0 down.
Amazon shares rose 17.2% over the past year against Microsoft's 1.94%. Microsoft looks better balanced: it funds capex from operating cash flow, earns software revenue on top of hardware, and can slow spending if demand fades. Amazon offers more upside potential alongside bigger swings. Trainium sales to outside customers could improve margins. Review once Amazon's new data centers generate revenue and free cash flow turns positive.
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