AI Revolution · Explainer · Updated Oct 2026
The compute buildout, explained: chips, capex and the new industrial base
By James Brown · Published · Updated
Hundreds of billions a year are going into data centers. Here's where the money goes and which companies sit in the supply chain.
Every industrial revolution has a capital-spending phase: railroads, electrification, fiber. AI's is happening now, and the numbers are written in the companies' own filings.
The spend
According to the International Energy Agency, capital expenditure by five large technology companies surged to more than $400 billion in 2025 and is set to rise a further 75% in 2026, driven by data centers. On its fiscal Q4 2026 call, Microsoft said it expects roughly $175 billion of calendar-2026 capex (a figure lowered from earlier guidance by a lease-accounting change, with underlying plans unchanged) and that about two-thirds of the quarter's capex went to short-lived assets, mainly CPUs and GPUs.
The chips
NVIDIA's results show where much of that money lands. For the quarter ended July 26, 2026, NVIDIA reported revenue of $96.2 billion, up 106% year over year, with Data Center revenue of $89.0 billion, up 117%. The company guided to about $108 billion for the next quarter. On the earnings call, management said it expects supply to remain a bottleneck through at least the end of fiscal 2028.
The foundry
Most leading-edge AI chips, from NVIDIA, AMD, Broadcom-designed custom accelerators and others, are manufactured by TSMC. In its 2Q26 report TSMC said high-performance computing made up 66% of revenue, against 22% for smartphones. A decade ago smartphones were the company's core business.
The map
- Designers: NVIDIA, AMD, Broadcom (custom accelerators and networking)
- Manufacturing: TSMC
- Buyers/operators: Microsoft, Alphabet, Amazon, Meta
- Constraints: power, memory, grid connections, advanced packaging
Track these companies on our Markets snapshot. Remember that a strong industry doesn't guarantee a good stock price. Valuations already reflect expectations.
Sources
- IEA press release, 16 Apr 2026
- Microsoft FY2026 Q4 earnings call
- NVIDIA Q2 FY2027 results press release (Aug 26, 2026)
- NVIDIA Q2 FY2027 CFO commentary (SEC)
- NVIDIA Q2 FY2027 earnings call transcript
- TSMC 2Q26 Management Report
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FAQ
How much are tech companies spending on AI infrastructure?
The IEA reports that five large tech companies spent more than $400 billion in capex in 2025, with a further ~75% increase expected in 2026.
Who makes most advanced AI chips?
Companies like NVIDIA, AMD and Broadcom design them. TSMC manufactures most leading-edge AI chips.
Does a booming industry mean the stocks will go up?
No. Share prices already reflect expectations, and strong industries can still produce disappointing investments. This is not financial advice.