Tech stocks fall as investors question Big Tech's AI spending
Alphabet, Amazon, Meta and Microsoft plan more than $740 billion in capital spending this year, and TechCrunch reports that investors are growing nervous about the cost.
Shares of major technology companies fell sharply as investors grew worried about how much Big Tech is spending on artificial intelligence, according to TechCrunch.
The Nasdaq fell 2.9% on Friday, TechCrunch reported. Nvidia dropped 4%, Broadcom fell more than 5% and Qualcomm lost 11%. Alphabet fell again on Friday after a 12% drop on Thursday. TechCrunch said Thursday was Alphabet's worst day on record and wiped out $500 billion of its market value.
Over the past two weeks, Alphabet, Amazon, Meta and Microsoft have laid out plans to spend more than $740 billion on capital expenditures this year. Wall Street reads that spending as money for AI infrastructure such as data centers and chips, the outlet reported.
Why it matters
Earlier in the AI boom, investors mostly rewarded large outlays like these. TechCrunch reported that this enthusiasm now appears to be giving way to worries about negative free cash flow, rising debt and whether the investments will ever pay off.
Alphabet reported negative free cash flow of $9.1 billion in the third quarter, its second quarter in a row in the red, while its quarterly capital spending rose to $51.4 billion. Growth in Google's Search advertising business, which brings in roughly half of the company's revenue, slowed to 12%. TechCrunch said that was its weakest pace in five quarters, and linked the slowdown to the success of AI Mode, Google's chatbot feature inside Search.
Amazon reported negative free cash flow of $42.4 billion over the past 12 months. Meta reported negative free cash flow of $2.1 billion in the third quarter. Meta CEO Mark Zuckerberg has said its new AI agent, Muse, is "very compute-intensive to run," according to the outlet.
Microsoft was the exception, with $18.6 billion in positive free cash flow in its latest quarter. Its capital spending came in at $45.2 billion, below the $50 billion it had projected. Microsoft said this was not a deliberate pullback and blamed delays in capacity from third-party providers.
TechCrunch, citing S&P Global Market Intelligence, reported that Microsoft, Alphabet, Amazon, Meta and Oracle raised a combined $326 billion in debt in 2026, three times what they raised last year.
What is not known yet
It is not clear whether the spending will produce enough returns to justify it. Demand for AI computing is still strong, and Google, Amazon and Microsoft all reported gains in their cloud businesses, the outlet noted.
The market mood could also affect Anthropic, which filed to go public earlier this week. TechCrunch, citing the Financial Times, reported that Blackstone has warned investors that Anthropic might not qualify for an investment-grade rating after its IPO. How that would affect the offering has not yet been reported.
