so where is the capex currently going? if they are constrained by power to actually power the data centers?

Even if a hyperscaler cannot immediately hook up a new 500-megawatt facility to the grid, the capital expenditure meter is still running at maximum speed. In 2026, the four major US hyperscalers are projected to spend close to $700 billion.

If they can't plug new data centers in, where is all that cash actually going today? It is flowing into a mix of hardware upgrades, supply-chain hoarding, and massive infrastructure waitlists.

Here is exactly where the CapEx checks are being written right now:

1. Silicon and Short-Lived Assets (The Lion's Share)

Historically, you might assume "CapEx" means buying land and laying concrete. In the AI era, the vast majority of capital expenditure goes straight into fast-depreciating silicon. Roughly two-thirds of Microsoft’s recent CapEx, for example, went toward "short-lived assets" like GPUs and CPUs.

• The Upgrade Cycle: Because power is capped at existing data centers, hyperscalers are actively ripping out older, traditional servers and replacing them with the newest, highest-density AI hardware. They are spending hundreds of billions on Nvidia GPUs, custom in-house chips (like Google's TPUs or Amazon's Trainium), and the High-Bandwidth Memory (HBM) required to run them. This allows them to get drastically more compute out of the exact same power envelope.
• Hoarding: Hyperscalers are also buying silicon and racking it up in warehouses, letting it sit idle so that it is ready the precise moment a new facility finally gets power.

2. Heavy Electrical Equipment (Buying a Spot in Line)

To build a data center, you need massive power transformers, switchgear, backup generators, and electrical distribution units. As mentioned earlier, this equipment has a 2-to-4 year lead time.

• Hyperscalers are not waiting for a grid connection to order this gear. They are spending billions today to secure their place in the manufacturing backlog of industrial power companies like Eaton, Schneider Electric, and nVent. The cash has to be deployed now to ensure the physical electrical components exist three years from now.

3. Advanced Cooling and Networking

AI racks are incredibly dense and run exponentially hotter than standard cloud servers.

• A massive chunk of current CapEx is flowing into companies that build liquid cooling infrastructure (like Vertiv) to keep the chips from melting.
• Additionally, training massive AI models requires thousands of GPUs to "talk" to each other flawlessly. Hyperscalers are spending billions on optical networking equipment, fiber, and advanced switches to stitch these chips into massive supercomputers.

4. Real Estate and Colocation Leases

Hyperscalers do not build every data center from scratch. They are pouring CapEx into massive, long-term leases with specialized Data Center Real Estate Investment Trusts (REITs) like Equinix and Digital Realty.

• Because these REITs specialize in securing land and power permits years in advance, hyperscalers are paying them premium, double-digit rate hikes just to absorb whatever available, powered real estate exists on the market right now.

5. Energy Development (The Long Game)

While it's a smaller piece of the pie compared to silicon, billions are being allocated toward the actual generation of power. This includes funding the engineering studies for Small Modular Reactors, signing massive Power Purchase Agreements (PPAs) with utility companies at premium rates, and investing in localized natural gas and battery storage solutions.

The Financial Risk

This spending distribution is exactly what makes Wall Street nervous. The majority of the $700 billion being spent in 2026 is going toward chips that will be economically obsolete in three to five years.

If a hyperscaler buys a GPU today, but it takes two years to get the power to turn it on, that chip will have lost half of its useful competitive lifespan before it ever processes a single token of data. They are racing against a clock where their most expensive assets are depreciating faster than the concrete around them can dry.