Big Tech's AI Spending Boom Faces Investor Backlash Over Negative Cash Flow and Debt

Over the past two weeks, Alphabet, Amazon, Meta, and Microsoft have outlined plans to spend more than $740 billion on capital expenditures this year, which Wall Street is reading as AI infrastructure spending, including data centers and chips. However, as we enter the fourth quarter, investor enthusiasm for these outlays is giving way to concerns about negative free cash flow, mounting debt, and whether these enormous investments will ever generate enough returns.

The anxiety spilled across the market on Friday. The Nasdaq fell 2.9%, and chip stocks took a drubbing: Nvidia dropped 4%, Broadcom more than 5%, and Qualcomm 11%. Alphabet, which plummeted 12% on Thursday, its worst day on record, wiping out $500 billion in market value, fell again.

Alphabet provided the clearest example of this shift. Google’s parent company reported negative free cash flow of $9.1 billion in the third quarter, its second consecutive quarter in the red, even as quarterly capex grew to $51.4 billion. Alphabet expects to spend up to $205 billion this year, with spending projected to keep rising in 2027. Meanwhile, the wild success of AI Mode is eating into Google’s money-maker, with Search advertising growth slowing to 12%, its weakest pace in five quarters.

Amazon is in a similar boat after reporting negative free cash flow of $42.4 billion over the past 12 months, compared with $14.8 billion in positive free cash flow the year before. The company says it expects to spend $220 billion in capex this year. Even though revenue at its cloud business, AWS, grew 39%, Amazon’s stock tumbled 7% after it reported earnings. Meta is also burning cash, reporting negative free cash flow of $2.1 billion in the third quarter as capex outpaced its operating cash, guiding to as much as $145 billion in capex this year.