Big tech plans $828 billion AI spend as stocks drop
Tech giants plan spending up to $828 billion on AI.
The short version
- Amazon and Meta join Microsoft in massive infrastructure outlays.
- Stocks tumbled Friday as markets lost one trillion in value.
- Heavy borrowing may soon raise capital costs for businesses everywhere.
The richest companies in the world are burning through billions in cash to build artificial intelligence infrastructure, according to Fortune. Amazon, Alphabet, Microsoft, Meta which owns Facebook and WhatsApp, and Elon Musk's space and AI company SpaceX are set to invest as much as $828 billion on capital expenditures this year.
That spending includes data centers and high-powered chips, pushing total outlays past the market value of energy giant ExxonMobil. Partly in response to the massive spending, stocks tumbled on Friday, leading the Nasdaq to drop 2.9% and erasing more than $1 trillion in market value.
Four of the five tech giants posting these numbers had negative free cash flow last quarter, meaning they spent more on equipment than they generated in cash. Microsoft announced a $25 billion bond offering, its first bond sale in more than nine years.
Meta reported negative free cash flow of $2.1 billion last quarter and plans to issue new shares to raise up to $95 billion. Oracle, the business software provider, told investors it does not expect to return to positive free cash flow until 2028.
Aleksandar Tomic, an economist and associate dean at Boston College, warned that these infrastructure bets could lead to consequences far beyond Silicon Valley if they fail. If these companies borrow more to fund expansion, it could raise the cost of capital for other businesses trying to borrow for their own needs.
Photo: Jelson25, Public domain, via Wikimedia Commons
