Cracks are emerging in the AI spending boom

What happened

Big Tech is doubling down on AI infrastructure spending, but investors' attitudes are shifting. Over the past two weeks, Alphabet, Amazon, Meta, and Microsoft have outlined plans to spend more than $740 billion in capital expenditures this year, which Wall Street reads as AI infrastructure spending, including data centers and chips. Earlier in the AI boom, investors largely rewarded such big outlays as a sign of confidence in the technology's growth potential, but as the fourth quarter begins, that enthusiasm is giving way to concerns about negative free cash flow, mounting debt, and whether these enormous investments will ever generate enough returns.

The anxiety spilled across the market on Friday: the Nasdaq fell 2.9%, and chip stocks took a drubbing — Nvidia dropped 4%, Broadcom more than 5%, and Qualcomm 11%. Alphabet, which plummeted 12% on Thursday — its worst day on record, wiping out $500 billion in market value — fell again.

Key details

• Alphabet: negative free cash flow of $9.1 billion in the third quarter, its second consecutive quarter in the red; quarterly capex grew to $51.4 billion, with expected spending of up to $205 billion this year and further increases expected in 2027.
• Amazon: negative free cash flow of $42.4 billion over the past 12 months, versus $14.8 billion positive a year earlier; it expects $220 billion in capex this year. Even though AWS revenue grew 39%, its stock tumbled 7% after earnings on Thursday.
• Meta: negative free cash flow of $2.1 billion in the third quarter as capex outpaced operating cash; capex guidance of up to $145 billion this year. The company noted its new free personal AI agent, Muse, is a bit of a money pit (it's "very compute-intensive to run," CEO Mark Zuckerberg has said), but ad revenue grew 26% — still, the stock took a 10% hit last week.
• Microsoft: the only exception, recording $18.6 billion in positive free cash flow in its latest quarter, with capex at $45.2 billion, less than the $50 billion projected. Microsoft said this wasn't an intentional pullback from AI spending, blaming delays in capacity from third-party providers — which caused shares of smaller companies that rent out AI computing power to sink.
• Funding structure: 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 — the money for AI infrastructure isn't just coming from profits, but also from stock and bond sales.

A deeper issue is at play: companies that used to have overflowing free cash flow from their core businesses are being hit as AI threatens the economics of those businesses. Alphabet is the clearest example — the wild success of AI Mode, Google's AI-powered chatbot feature built directly into Search, is eating into the company's money-maker: Search advertising, roughly half of its revenue, saw growth slow to 12%, its weakest pace in five quarters. Google is walking a tightrope, spending billions on AI technology that could undermine the search business that pays it.

Why it matters

Demand for AI compute remains strong — Google, Amazon, and Microsoft all saw gains in their cloud businesses. What spooks investors is the cost of meeting that demand: as AI spending erodes cash flows from core businesses, markets are questioning whether enormous capex will translate into sufficient returns.

This uncertainty may also affect how AI companies raise capital. Anthropic 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 the company might not qualify for an investment-grade rating after its IPO, meaning it might end up more reliant on the hyperscalers and third parties to fund its infrastructure ambitions.

Who it affects

• Big Tech companies and their shareholders: negative free cash flow, record capex, and stock declines directly hit their valuation logic.
• Chip companies: last Friday's drops in Nvidia, Broadcom, and Qualcomm show the anxiety has spread through the AI supply chain.
• Smaller companies renting out AI computing power: Microsoft's attribution of lower spending to third-party capacity delays sent their shares down.
• AI companies preparing to go public (such as Anthropic): a tighter funding environment combined with investment-grade rating uncertainty may push them to rely more on hyperscalers and third-party infrastructure.

Overall, the market's stance on AI spending is shifting from rewarding to scrutinizing — a change that hits hyperscalers, suppliers, and the financing environment for downstream AI companies alike.

Investors are getting nervous about AI infrastructure spending just as the Big Tech companies double down.

Over the past two weeks, Alphabet, Amazon, Meta, and Microsoft have outlined plans to spend more than $740 billion on capital expenditures this year, which Wall Street is reading as AI infrastructure spending, including data centers and chips.

Earlier in the AI boom, investors largely rewarded such big outlays, viewing them as a sign of confidence in the technology’s growth potential. But as we enter the fourth quarter, that enthusiasm seems to be giving way to concerns about negative free cash flow (spending more cash than a company brings in), mounting debt, and whether these enormous investments will ever generate enough returns.

The anxiety spilled across the market on Friday. The Nasdaq fell 2.9%, and chip stocks took a drubbing, too: Nvidia dropped 4%, Broadcom more than 5%, and Qualcomm 11%. Alphabet, which plummeted 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 getting 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 capex grew to $51.4 billion. Alphabet expects to spend up to $205 billion this year, and expects that spending to keep rising in 2027.

Meanwhile, the wild success of AI Mode — Google’s AI-powered chatbot feature built directly into Search — is eating into the company’s money-maker. Google’s Search advertising business, which makes up roughly half of its revenue, saw growth slow to 12%, its weakest pace in five quarters. That leaves Google walking a tightrope. It’s spending billions on the AI technology that could undermine the search business that pays it.

Amazon is in a similar boat after reporting negative free cash flow of $42.4 billion over the past 12 months, compared with $14.8 billion in positive free cash flow the year before. The company says it expects to spend $220 billion in capex this year. Even though revenue at its cloud business, AWS, grew 39%, Amazon’s stock tumbled 7% after it reported earnings Thursday.

Meta is also burning cash, reporting negative free cash flow of $2.1 billion in the third quarter as capex outpaced its operating cash. It’s guiding to as much as $145 billion in capex this year. The company noted that Muse, its new free personal AI agent, is a bit of a money pit (it’s “very compute-intensive to run,” CEO Mark Zuckerberg has said). But ad revenue grew 26%. Still, no amount of good news saved Meta from taking a 10% hit on its stock last week.

Microsoft was the only exception when it came to free cash flow — it recorded $18.6 billion in positive free cash flow in its latest quarter, with spending on capex at $45.2 billion, less than the $50 billion it projected. Microsoft said that wasn’t an intentional pullback from AI spending, blaming delays in capacity from third-party providers. As a result, shares of smaller companies that rent out AI computing power sank.

It’s worth noting that the money to pay for all of this AI infrastructure isn’t just coming from the Big Tech companies’ profits. It’s also showing up in 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.

Demand for AI compute remains strong. Google, Amazon, and Microsoft all saw gains in their cloud businesses. But investors are getting spooked by the costs of meeting that demand.

These muddied waters could complicate Anthropic’s highly anticipated IPO. The AI company filed to go public earlier this week, and its future growth depends on securing enormous amounts of compute. Financial Times reported Friday that Blackstone has warned investors the company might not qualify for an investment-grade rating after its IPO, meaning it might end up being more reliant on the hyperscalers and third-parties to fund its infrastructure ambitions.

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Rebecca Bellan is a senior reporter at TechCrunch where she covers the business, policy, and emerging trends shaping artificial intelligence. Her work has also appeared in Forbes, Bloomberg, The Atlantic, The Daily Beast, and other publications.

You can contact or verify outreach from Rebecca by emailing [email protected] or via encrypted message at rebeccabellan.491 on Signal.

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