AI Spending Shock Deepens Tech Stock Rout

 

The latest

Technology stocks faced another sharp, broad selloff Friday as investors absorbed the scale of artificial intelligence infrastructure spending at Amazon, Alphabet, Meta and SpaceX. The pressure centered on shrinking free cash flow and the debt set to support prolonged expansion programs, rather than Intel’s weak guidance tied to an extended memory chip shortage. Spending plans came in well above Wall Street’s expectations, leaving fewer investors willing to buy the decline as Friday’s session headed toward further technology losses.

Details

• Amazon cash drain: Amazon’s free cash flow fell to an outflow of $42.4 billion for the trailing 12 months, from a $14.8 billion inflow in the period ended Sept. 30 a year earlier. The company attributed the reversal mainly to a $94.8 billion year-over-year increase in property and equipment purchases, primarily reflecting artificial intelligence investments.
• Capex keeps climbing: Chief Executive Andy Jassy said Amazon still expects about $220 billion of cash capital expenditure in 2026, with most of it directed to Amazon Web Services. He added during the earnings call that spending would be meaningfully higher in 2027. Amazon shares dropped about 7% in Friday’s premarket trading.
• Google misses estimates: Google recorded negative free cash flow of $9.1 billion for the quarter, compared with Wall Street’s estimate for a $3.5 billion outflow. The wider-than-expected deficit intensified concerns about the cost of AI development, while more than $500 billion was erased from the company’s market value Thursday.
• Meta and SpaceX: Meta reported negative free cash flow in its third-quarter results for the first time since 2012. SpaceX, meanwhile, burned about $9.9 billion in free cash flow during the quarter. Both stocks remained under selling pressure following their earnings, broadening the market reaction beyond Amazon and Alphabet.
• Collective deficit: Evercore ISI strategist Julian Emanuel expects hyperscaler free cash flow to remain negative. His research projects that Meta, Amazon, Google, Microsoft, Oracle and SpaceX are approaching a combined free cash flow deficit of nearly $200 billion over the next year, underscoring the scale of capital committed to their infrastructure expansion.

Between the lines

Free cash flow has become the critical measure for investors assessing the AI investment cycle because it represents the money available to finance expansion and repay debt. As spending remains elevated for longer, pressure is spreading beyond equity valuations to debt markets evaluating how the companies will fund their buildouts.

What’s next

The next quarterly earnings cycle will provide updated free cash flow figures across the hyperscaler group. Investors will also watch Amazon’s detailed 2027 capital expenditure plans and whether the six-company deficit moves toward Evercore ISI’s projected $200 billion over the coming year.