Big Tech's $740 Billion AI Spending Spree Meets a Nervous Market

Alphabet, Amazon, Meta, and Microsoft have unveiled plans to spend more than $740 billion on capital expenditures this year — and Wall Street is no longer cheering. Over the past two weeks, all four companies laid out spending plans that investors read largely as AI infrastructure outlays, covering data centers and chips. The reaction marked a sharp break from earlier phases of the AI boom, when big budgets were rewarded as a sign of confidence in the technology.

The anxiety turned into a rout on Friday. The Nasdaq fell 2.9%. Nvidia dropped 4%, Broadcom lost more than 5%, and Qualcomm slid 11%. Alphabet, which had plummeted 12% on Thursday — its worst day on record, wiping out $500 billion in market value — fell again.

Why is free cash flow suddenly the number that matters?

Investors are now focused on negative free cash flow, mounting debt, and the open question of whether these enormous investments will ever generate sufficient returns. The problem cuts deeper than spending: AI is threatening the economics of the very businesses that used to produce overflowing cash.

Alphabet provided the clearest example this week. Google's parent 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, and it expects spending to keep rising in 2027.

Google's own AI product is squeezing the cash machine. AI Mode, the company's chatbot feature built directly into Search, has been wildly successful — and it's eating into the money-maker. Search advertising, which makes up roughly half of Google's revenue, grew just 12%, its weakest pace in five quarters. Google is now spending billions on AI technology that could undermine the search business that pays for it.

Amazon tells a similar story. The company reported negative free cash flow of $42.4 billion over the past 12 months, a swing from $14.8 billion in positive free cash flow the year before. Amazon expects $220 billion in capex this year. AWS revenue grew 39%, yet the stock tumbled 7% after Thursday's earnings report.

Meta burned $2.1 billion in negative free cash flow in the third quarter as capex outpaced operating cash, and it's guiding to as much as $145 billion in capex this year. CEO Mark Zuckerberg has acknowledged that Muse, Meta's new free personal AI agent, is "very compute-intensive to run." Ad revenue grew 26%, but that didn't stop a 10% hit to Meta's stock last week.

Who is paying for all this?

Not just Big Tech's profits. The buildout is increasingly funded by stock and bond sales. 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.

Microsoft stood alone on free cash flow. It recorded $18.6 billion in positive free cash flow in its latest quarter, with capex at $45.2 billion, below the $50 billion it had projected. Microsoft said the shortfall wasn't an intentional pullback from AI spending, and blamed delays in capacity from third-party providers. Shares of smaller companies that rent out AI computing power sank on the news.

What does this mean for Anthropic's IPO?

The turbulence lands at an awkward moment for Anthropic. The AI company filed to go public earlier this week, and its future growth depends on securing enormous amounts of compute. The Financial Times reported Friday that Blackstone has warned investors Anthropic might not qualify for an investment-grade rating after its IPO — meaning it could end up more reliant on the hyperscalers and third parties to fund its infrastructure ambitions.

Demand for AI compute hasn't weakened. Google, Amazon, and Microsoft all posted gains in their cloud businesses. But with hyperscalers financing record capex with record debt, the market has started pricing the cost of meeting that demand — and Anthropic's bankers may have to as well.

By Amara Osei