Investor Worries Over AI Spending Hit Big Tech Shares
Alphabet, Amazon, Meta and Microsoft plan to spend more than $740 billion in capital expenditures this year, which markets read as AI infrastructure investment. Concerns over cash flow and debt pushed stocks lower on Friday.
Four of the largest US technology companies — Alphabet (Google's parent), Amazon, Meta and Microsoft — have said over the past two weeks that they will spend more than $740 billion on capital expenditures this year. Wall Street reads this as spending on artificial intelligence (AI) infrastructure, including data centers and chips. Investors earlier tended to reward such outlays, but concern is now growing about negative free cash flow (spending more cash than a company takes in), rising debt and whether the investments will pay off.
The unease showed on Friday. The Nasdaq, the US tech-heavy stock index, fell 2.9%. Chip stocks also dropped: Nvidia lost 4%, Broadcom more than 5% and Qualcomm 11%. Alphabet shares had plunged 12% on Thursday, the company's worst day on record, erasing $500 billion in market value, and fell again on Friday.
Company results
Alphabet reported negative free cash flow of $9.1 billion for the third quarter, its second straight quarter in the red, as quarterly capex rose to $51.4 billion. It expects to spend up to $205 billion this year, with spending set to keep rising in 2027. Meanwhile, Google's AI Mode, an AI chatbot feature built into Search, is cutting into its core business: search advertising, roughly half of revenue, grew 12%, the slowest pace in five quarters.
Amazon reported negative free cash flow of $42.4 billion over the past 12 months, against positive $14.8 billion a year earlier, and expects $220 billion in capex this year. Although revenue at its cloud unit AWS rose 39%, the stock fell 7% after earnings.
Meta posted negative free cash flow of $2.1 billion in the third quarter and guides to as much as $145 billion in capex. Ad revenue grew 26%, yet its shares fell 10% last week. Microsoft was the exception, with positive free cash flow of $18.6 billion; its capex of $45.2 billion was below the $50 billion it projected, which it blamed on capacity delays at third-party providers.
Rising debt
According to S&P Global Market Intelligence, Microsoft, Alphabet, Amazon, Meta and Oracle raised a combined $326 billion in debt in 2026, triple last year's amount. Demand for AI computing remains strong, but investors are wary of the cost of meeting it. This could complicate the expected IPO of AI company Anthropic, which filed to go public this week. The Financial Times reported that Blackstone has warned investors the company may not qualify for an investment-grade rating after the listing.
