As the investments of megascalers attract attention, it's important to recognize that 2025 is an overall favorable enviroment for capital expenditures, with bonus depreciation in the last years of it's phase-out.
The biggest technology companies, surely have every reason to invest in AI, and they also undoubtedly pull projects forward their already timely projects, so they can benefit from bonus depreciation, which is being phased out.
Big Cloud Providers (Hyperscalers) Leverage Accelerated & Bonus Depreciation
The major cloud providers and hyperscalers leverage accelerated and bonus depreciation to reduce taxable income and improve cash flow when funding data centers.
Bonus Depreciation - Under U.S. tax law (from the 2017 Tax Cuts and Jobs Act), companies can immediately deduct a significant percentage of the costs of eligible capital expenditures, including IT equipment and certain building improvements (i.e. solar). This helps hyperscalers to recover their costs faster and reinvest in growth.
Accelerated Depreciation (MACRS) - As an example, the Modified Accelerated Cost Recovery System (MACRS) enables faster depreciation of servers and other infrastructure compared to traditional straight-line depreciation.
Combining Bonus Depreciation and MACRS - the earlier depreciation helps data center owners increase Cash Flow in early years. This frees up cash, that can be reinvested into more data centers, along with for other business purposes.
Staying Ahead of Policy Changes - With bonus depreciation phasing down (80% in 2023, 60% in 2024, 40% in 2025, etc.), hyperscalers have an incentive beyond the high-margin unit economics of their cloud businesses, to pull investments forward.
Of course, these are trillion dolar businesses. And their 2025 capital expenditures are hard to grasp since the numbers are so large. Amazon ($75+ Billion), Microsoft ($80+ Billion), Google ($75 Billion, Meta ($65+ Billion). Estimate that half of the planned expenditures are in the U.S.
The same depreciation benefits are available to all businesses with tax liabilities, even if the dollars are on a smaller scale. As the saying goes, "What is good for the goose, is good for the gander." Making 2025, a good year to potentially pull capital expenditures (i.e. solar projects) forward.