Meta Vs. Microsoft: Can Their AI Infrastructure Plans Hold Up Against DeepSeek?

It's no surprise that Meta Platforms Inc META and Microsoft Corp MSFT have been on a capex spree, pouring billions into their cloud infrastructure and AI ambitions.

Yet, just as the tech giants hit double-digit growth in the December quarter, a potential hiccup looms over their investment strategies—thanks to a little something called DeepSeek.

And as these two tech titans race in 2025, both are looking to strike a delicate balance between growth and optimization.

Meta's Power Play: Capex As A Strategic Advantage

Meta's cloud investments are cruising ahead with strong double-digit growth into 2025, with a hefty capex target of $60-65 billion for next year, representing a solid 60% y/y growth. This hefty investment is fueled by AI, servers, and data centers, which will be vital for Meta's grand ambitions.

Despite a looming focus on efficiency, Meta is playing down any concerns about cutting back on compute power, as the company still views these investments as its competitive edge.

“Robust capex investments will represent a strategic advantage over time,” Meta emphasized, according to JPMorgan analyst Doug Anmuth. It's clear that Meta's roadmap involves some serious firepower—both figuratively and literally—especially as it ramps up infrastructure to stay ahead of competitors.

Read Also: Mark Zuckerberg Says China’s DeepSeek Did Some Novel Things ‘We’re Still Digesting,’ But Meta May Keep Pouring Billions Into AI Infrastructure Anyway

Microsoft’s Cloud Capex: Keep Calm & Optimize

Meanwhile, Microsoft’s cloud capex for the December quarter surged by 97% y/y to $22.6 billion, a bit higher than expected. But while Microsoft’s trajectory remains positive, there’s a twist: the company is signaling flat sequential growth for the first half of 2025.

Why? A focus on “optimization” after the DeepSeek announcement. Microsoft wants to keep the momentum going but is cautious about scaling up too fast, especially as AI infrastructure and server investments take precedence.

To be fair, Microsoft has been the capex leader for quite some time now, with a quarterly average roughly +$10 billion higher than Meta's since March 2023, as noted by JPMorgan analyst Mark Murphy. But it's clear that the company is now entering a more measured phase of its cloud strategy, focusing on AI-related infrastructure and cost reduction at a software level.

Microsoft emphasized the importance of “optimization from a software level in order to reduce the price (cost) of LLMs to generate broader demand,” according to Murphy.

Looking To The Horizon: Can They Both Win In The AI Race?

As both Meta and Microsoft pour resources into their AI and cloud infrastructure, it's evident that neither is slowing down anytime soon. The battle between the two will be one of scale, innovation, and, most critically, how they balance investment with optimization.

For investors, the outlook remains "favorable for AI-levered names," according to JPMorgan analysts.

With both tech behemoths playing their cards carefully, it's clear that cloud growth isn't just about size—it's about finding efficiencies, optimizing infrastructure, and betting big on AI.

And if DeepSeek is any indicator, the real question may not be how much they invest but how smartly they do it.

Read Next:

• Microsoft CEO Satya Nadella Accepts DeepSeek AI Has Some ‘Real Innovations’ — But Won’t Say If They Mark A Turning Point For AI Cost Reduction

Image created using artificial intelligence via Midjourney.