The numbers that triggered the September 28 letters led by Elizabeth Warren are not subtle. Microsoft’s current federal tax expense dropped by over $11 billion between fiscal year 2025 and fiscal year 2026, while the company’s pre-tax income increased $42.3 billion. Meta’s current federal tax expense decreased by nearly $7 billion between 2024 and 2025, while the company’s pre-tax income increased by over $15 billion. Those are not rounding errors. They are structural shifts in how the government’s share of tech profits is calculated.
The mechanism is straightforward. The One, Big, Beautiful Bill Act (OBBBA), enacted July 4, 2025, permanently restored 100% bonus depreciation and restored expensing of domestic research and experimentation (R&E) costs for tax years beginning on or after January 1, 2025, with additional retroactive relief available in certain cases. The tax incentives were not designed with AI in mind specifically, they are available for all kinds of business investments. But the tech industry’s capital spending is so concentrated and so large that the effect is outsized. The Congressional Budget Office said corporate tax receipts over the first 11 months of fiscal 2026 fell by $96 billion, from $390 billion over the same period in fiscal 2025 to $294 billion.
Warren, joined by Tina Smith, Jeff Merkley, Bernie Sanders, Richard Blumenthal, Elissa Slotkin, and several other Senate Democrats, sent letters to the CEOs of Meta, Amazon, Alphabet, and Microsoft demanding disclosure of every deduction claimed under the OBBBA for AI and data-center development. Responses are due October 11, 2026. Data centers and AI more broadly have become a flash point leading up to the 2026 midterm election, as Washington scrambles to address growing backlash to the technology and the facilities that power it. This is politics, and investors should read it as such.
But politics aside, the investigation raises a question worth asking independently: are these deductions load-bearing for the investment case in Amazon and Alphabet, or incidental to it?
The honest answer differs by company. Amazon Web Services and Google Cloud are compounding at rates that would justify the capital investment without any preferential tax treatment. Warren’s office estimated tax savings of roughly $17.9 billion for Alphabet and roughly $15.7 billion for Amazon. Those are large numbers. They are also numbers that, if eliminated tomorrow, would slow but not reverse the unit economics of the two leading hyperscalers. Both businesses generate returns on invested capital that exceed their cost of capital by wide margins, tax benefit or not.
Meta is a different case. In their letter, the senators tied Meta’s tax decline directly to its capital expenditures, arguing that the company’s surge in investment in data centers and AI could be a major driver of the lower current federal tax bill under the OBBBA. Meta noted in April that it recognized an $8.03 billion income tax benefit in the first quarter of 2026 related to the OBBBA. When a benefit that size shows up in a single quarter, the question of dependency becomes harder to dismiss.
The letters are requests for information. They are not findings, not charges, and not evidence that any company did anything improper. The deductions at issue are provided by statute, and claiming them is lawful. The political risk here is legislative: a future Congress could narrow or repeal bonus depreciation, restoring something closer to the pre-OBBBA tax schedule.
A disciplined long-term investor does not simply ask whether a company benefits from a policy. The better question is whether the business can stand without it. For Amazon and Alphabet, the answer is almost certainly yes. Their competitive moats, customer relationships, and pricing power in cloud computing were not created by a tax code. They would survive a less generous one. For Meta, which has spent more aggressively relative to its core business and benefited more visibly in a single quarter, the answer demands closer examination before the next spending cycle begins.
If the letters produce detailed disclosures showing exactly how much each company saved through OBBBA-related deductions, those numbers could become ammunition for future legislative efforts. Investors in all four companies should want that transparency before Congress does.
