Don’t blame Intel’s weak forecasts, tied to a prolonged supply shortage of memory chips, for the new decline in technology stocks. Blame hyperscalers like Amazon (AMZN), Alphabet (GOOGL), and Meta (META) for not properly guiding Wall Street on how much they planned to spend this year and next on AI infrastructure. The bills are coming in at a much higher amount than expected and Wall Street can’t handle it. That’s why you don’t see many heroes saying to buy the dip right now. That’s why Friday is shaping up to be another bloodbath for tech stocks. Remember, it is cash flow that will be used to pay off all the debt that hyperscalers are willing to incur to support their robust AI infrastructure build. The fact that cash flow is drying up due to a prolonged period of spending is the virus that is causing the debt and equity markets to take a cold. Kudos to Amazon for at least not burying its free cash flow metric, the most important metric for tech right now, at the end of its earnings release. It didn’t make it any less difficult to digest, but at least it was easy to find quickly. Amazon’s free cash flow decreased to an outflow of $42.4 billion over the trailing twelve months, driven primarily by a year-over-year increase of $94.8 billion in property and equipment purchases. This increase primarily reflects investments in artificial intelligence, Amazon said. This compares to a free cash flow inflow of $14.8 billion for the trailing twelve months ended September 30 last year. “We still expect 2026 cash capital spending of approximately $220 billion, the majority for AWS, and we expect to spend significantly more in 2027,” Amazon CEO Andy Jassy said on its earnings call. Amazon shares are down 7% in premarket trading today. 243.79 -10.81 (-4.25%) Close: Oct 29 4:00:01 pm EDT 227.52 -16.27 (-6.67%) Premarket: 6:59:03 am EDT Late Wednesday, Google posted negative free cash flow of $9.1 billion for the quarter, versus a Wall Street estimate of Negative 3.5 billion dollars. On Thursday, Google lost more than $500 billion in market value. Meta dropped a bombshell in its third-quarter results last week, posting negative free cash flow for the first time since 2012. SpaceX (SPCX) burned about $9.9 billion in free cash flow in the quarter. Both stocks have continued to sell off after the earnings. Hyperscaler’s free cash flow is likely to remain negative, notes EvercoreISI strategist Julian Emanuel. The hyperscaler cohort of Meta, Amazon, Google, Microsoft, Oracle (ORCL), and SpaceX (SPCX) is now close to the negative $200 billion expected next year, Emanuel’s research shows. This is what the market is pricing today. Painful, yes. Brian Sozzi is the Executive Editor of Yahoo Finance, host of the Sozzi Unleashed morning show, the ‘Power Players With Brian Sozzi’ podcast, and a member of Yahoo Finance’s editorial leadership team.
