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Optimism about the potential of AI to transform the tech industry has resulted in a dash to increase investment. Look no further than the income statement of Nvidia (NVDA) for signs of how frenetic this pace has been.

The share prices of the market's biggest tech companies making these investments also reveal that investors have been generally receptive to the idea.

And how management teams have gotten investors on board with the idea that spending billions against AI opportunities that might still be elusive is simple: They're also getting paid.

Take Alphabet (GOOG, GOOGL), for example.

In 2023, the company spent a little over $32 billion on capital expenditures, which they define in their annual report as spending that "primarily reflected investments in technical infrastructure." In 2022, capex spending totaled $31.5 billion.

Generally, this is money spent on chips, servers, and raw computing power to run what we experience as the company's suite of services — Search, YouTube, Gmail, and so on.

As AI overwhelmed any other strategic investment Alphabet may have contemplated for itself, this spending ramped considerably.

In the first quarter, the company's capex spending hit $12 billion. On a call with investors last week, CFO Ruth Porat said, "We expect quarterly capex throughout the year to be roughly at or above the Q1 level."

Porat cautioned that this spending can be lumpy. But that annualized rate of spending — $48 billion — is about 50% higher than what the company spent in each of the last two years.

To get investors on board with this approach, the company is offering a bounty. Ruth Porat, CFO, Alphabet and Google, speaks during the Milken Institute Global Conference on May 2, 2022, in Beverly Hills, Calif. (PATRICK T. FALLON/AFP via Getty Images) (PATRICK T. FALLON via Getty Images)

Alphabet initiated a quarterly dividend of $0.20 per share, the first regular dividend in the company's history. Its share buyback authorization was also increased by $70 billion, in addition to the $20 billion available under its existing program.

At its current share count, this dividend will cost Alphabet a little less than $10 billion per year in cash, paid out to shareholders. In the first quarter, Alphabet repurchased $16.1 billion worth of its own stock.

Increasing share buybacks will bring the cash-out spending on dividends down a smidge as repurchased shares are retired, but if the company roughly keeps up its current pace of repurchases, then quarterly shareholder returns should fall somewhere between $18 billion and $19 billion. On an annual basis, these figures should run closer to $75 billion.



With Alphabet's annual capex spending set to rise by at least $16 billion in 2024, investors are more than making up for it.

Now, as Meta (META) learned last week, this support can be fickle.

Its stock fell more than 10% after raising its forecast for spending this year, a move that came just three months after investors cheered Meta for the same initiative Alphabet announced last week — instating a dividend and increasing its buyback authorization.

Meta CEO Mark Zuckerberg told investors the company's first quarter results indicated the company "should invest significantly more over the coming years to build even more advanced models and the largest-scale AI services in the world."

"But realistically," he added, "even with shifting many of our existing resources to focus on AI, we'll still grow our investment envelope meaningfully before we make much revenue from some of these new products."

At least in the interim, investors will get paid for the privilege of waiting. A perhaps unexpected benefit from the AI boom.

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