Cracks are emerging in the AI spending boom

Alphabet, Amazon, Meta, and Microsoft have collectively outlined over $740 billion in capital expenditures this year, largely for AI infrastructure such as data centers and chips. While investors initially rewarded such spending as a sign of confidence, enthusiasm is now giving way to concerns about negative free cash flow, rising debt, and whether these investments will ever generate sufficient returns. The anxiety hit markets hard: the Nasdaq fell 2.9%, and chip stocks like Nvidia, Broadcom, and Qualcomm tumbled. Alphabet posted negative free cash flow of $9.1 billion in the third quarter, its second consecutive quarter in the red, while its core Search advertising growth slowed to 12% as AI Mode cannibalizes its money-maker. Amazon reported negative free cash flow of $42.4 billion over the past 12 months, and Meta posted negative free cash flow of $2.1 billion in the third quarter. Microsoft was the lone exception with $18.6 billion in positive free cash flow, though it attributed lower-than-projected capex to third-party capacity delays. Beyond profits, these companies raised a combined $326 billion in debt in 2026, triple the prior year. The muddying waters could complicate Anthropic's highly anticipated IPO, with Blackstone warning investors the company might not qualify for an investment-grade rating.

(Source：TechCrunch)