The AI spending boom is starting to show cracks. Over the past two weeks, Alphabet, Amazon, Meta and Microsoft outlined plans to spend more than $740 billion on capital expenditures this year, mostly on data centers and chips, according to TechCrunch. Investors who once rewarded those outlays are now questioning whether the money will ever pay off.
The anxiety spilled into the market on Friday. The Nasdaq fell 2.9%, Nvidia dropped 4%, Broadcom more than 5% and Qualcomm 11%. Alphabet, which lost $500 billion in market value on Thursday in its worst day on record, fell again. The concern is simple: AI is straining the free cash flow and debt loads of the companies funding it.
Negative free cash flow at Big Tech
The numbers tell the story. Alphabet reported negative free cash flow of $9.1 billion in the third quarter, its second consecutive quarter in the red, even as capital expenditure grew to $51.4 billion. Google's parent expects to spend up to $205 billion this year and says that figure will keep rising in 2027.
Amazon posted negative free cash flow of $42.4 billion over the past 12 months, compared with positive $14.8 billion a year earlier, and expects $220 billion in capex this year. Meta reported negative free cash flow of $2.1 billion in the third quarter and guides to as much as $145 billion in capex. Microsoft was the outlier, recording $18.6 billion in positive free cash flow; it blamed third-party capacity delays, not a deliberate pullback, for capex of $45.2 billion coming in below its $50 billion projection.
- Alphabet: negative free cash flow of $9.1 billion in Q3, a second straight quarter in the red; capex hit $51.4 billion and could reach $205 billion this year.
- Amazon: negative free cash flow of $42.4 billion over the past 12 months, versus positive $14.8 billion a year earlier; capex expected at $220 billion.
