Investor concern rises over Big Tech’s expanding AI infrastructure spend
Alphabet, Amazon, Meta and Microsoft have outlined more than $740 billion in capital expenditure for this year, spending that Wall Street largely interprets as funding for AI infrastructure such as data centres and chips. Investors that once treated those outlays as evidence of confidence in AI growth are now focusing on free cash flow, debt and the prospect of returns from the buildout.
The change in sentiment was visible in market trading. The Nasdaq fell 2.9% on Friday, while Nvidia dropped 4%, Broadcom declined by more than 5% and Qualcomm fell 11%. Alphabet, after losing 12% on Thursday in its worst day on record and shedding $500 billion in market value, fell again.
Cash flow becomes the central concern
Alphabet reported negative free cash flow of $9.1 billion in the third quarter, its second consecutive quarter in the red, as quarterly capital expenditure rose to $51.4 billion. The company expects to spend as much as $205 billion this year and says that spending will continue to rise in 2027.
The pressure is especially notable because Google’s core Search advertising business finances much of that investment. Search advertising, which accounts for roughly half of Alphabet revenue, grew 12%, its slowest pace in five quarters. At the same time, the company says the success of AI Mode, its AI-powered chatbot feature built into Search, is changing the economics around its principal revenue engine.
Amazon also reported negative free cash flow, at $42.4 billion over the past 12 months, compared with positive free cash flow of $14.8 billion a year earlier. It expects $220 billion of capital expenditure this year. AWS revenue grew 39%, yet Amazon shares still fell 7% after the company reported earnings.
Meta recorded negative free cash flow of $2.1 billion in the third quarter as capital expenditure exceeded operating cash flow, and it has guided to up to $145 billion in annual capex. Its advertising revenue rose 26%, but the company has acknowledged that Muse, its new free personal AI agent, is very compute-intensive to run. Meta shares fell 10% during the week.
Strong demand does not settle the funding question
Microsoft was the exception on free cash flow, reporting $18.6 billion in positive free cash flow in its latest quarter. Its $45.2 billion in capital expenditure was below the $50 billion it had projected, which Microsoft attributed to capacity delays at third-party providers rather than a deliberate reduction in AI investment. Shares in smaller companies that rent AI computing capacity declined after that disclosure.
Cloud demand remains robust: Google, Amazon and Microsoft all reported gains in their cloud businesses. But funding the infrastructure is not limited to operating profits. S&P Global Market Intelligence said Microsoft, Alphabet, Amazon, Meta and Oracle collectively raised $326 billion in debt in 2026, triple the amount raised in the previous year.
The changing backdrop may also matter for Anthropic’s anticipated IPO, given its need for very large amounts of compute. The practical implication for businesses planning AI investment is that demand growth alone is unlikely to satisfy stakeholders: spending plans need clear links to capacity needs, cash flow and sustainable funding.