Investors are getting nervous about spending on AI infrastructure just as big tech companies double down on their efforts. Over the past two weeks, Alphabet, Amazon, Meta and Microsoft have outlined plans to spend more than $740 billion in capital spending this year, which Wall Street interprets as spending on AI infrastructure, including data centers and chips. Early on in the AI boom, investors largely rewarded such large outlays, seeing them as a sign of confidence in the technology’s growth potential. But as we enter the fourth quarter, that enthusiasm appears to be giving way to concerns about negative free cash flow (spending more cash than a company takes in), rising debt, and whether these huge investments will ever generate enough returns. Anxiety spread through the market on Friday. The Nasdaq fell 2.9% and chip stocks also took a beating: Nvidia fell 4%, Broadcom more than 5%, and Qualcomm 11%. Alphabet, which plunged 12% on Thursday, its worst day on record, wiping out $500 billion in market value, fell again. A big part of the concern is that companies that used to have overflowing free cash flow from their core businesses are taking a hit as AI threatens the economics of those businesses. Alphabet provided the clearest example of that this week. 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 capital spending grew to $51.4 billion. Alphabet expects to spend up to $205 billion this year, and expects that spending to continue rising in 2027. Meanwhile, the runaway success of AI Mode (Google’s AI-powered chatbot feature built directly into Search) is eating away at the company’s revenue stream. Google’s search advertising business, which accounts for about half of its revenue, saw growth slow to 12%, its weakest pace in five quarters. That leaves Google walking a tightrope. It is spending billions on artificial intelligence technology that could undermine the search business that pays it. Amazon is in a similar situation after reporting negative free cash flow of $42.4 billion in the trailing 12 months, compared to $14.8 billion in positive free cash flow a year earlier. The company says it expects to spend $220 billion on capital expenditures this year. Although revenue from its cloud business, AWS, grew 39%, Amazon shares fell 7% after it reported earnings on Thursday. Meta is also burning cash, reporting negative free cash flow of $2.1 billion in the third quarter as capital spending exceeded its operating cash. Capital spending of up to $145 billion is expected this year. The company noted that Muse, its new free personal AI agent, is something of a money pit (it “requires a lot of compute to run,” CEO Mark Zuckerberg said). But advertising revenue grew 26%. Still, no good news saved Meta from taking a 10% hit to its stock last week. Microsoft was the only exception when it came to free cash flow: It posted $18.6 billion in positive free cash flow in its latest quarter, with investment spending of $45.2 billion, less than the $50 billion it projected. Microsoft said this was not an intentional pullback in AI spending, blaming delays in capacity from third-party vendors. As a result, shares of smaller companies that rent AI computing power sank. It’s worth noting that the money to pay for all this AI infrastructure doesn’t just come from the profits of big tech companies. It is also manifesting itself in sales of stocks and bonds. According to S&P Global Market Intelligence, Microsoft, Alphabet, Amazon, Meta and Oracle raised a combined $326 billion in debt in 2026, triple the amount raised last year. Demand for AI computing remains strong. Google, Amazon and Microsoft all saw gains in their cloud businesses. But investors are spooked by the costs of meeting that demand. These murky waters could complicate Anthropic’s long-awaited IPO. The artificial intelligence company filed to go public earlier this week and its future growth depends on securing huge amounts of computing. The Financial Times reported on Friday that Blackstone warned investors that the company may not qualify for an investment grade rating after its IPO, meaning it could end up relying more on hyperscalers and third parties to fund its infrastructure ambitions. When you buy through links in our articles, we may earn a small commission. This does not affect our editorial independence.
