Four of the technology industry's largest companies have set a spending record in the last quarter as they race to build artificial intelligence infrastructure. This surge in investment has created a concerning milestone where most of these firms are now spending more cash on data centers than they generate from their core business operations.
Over the past two weeks, Amazon, Microsoft, Google, and Meta indicated they are on track to spend more than $720 billion this year on data centers and other capital expenses. This figure represents roughly triple what these companies spent just two years ago, with expectations that spending will increase even further next year. The scale of these investments is significant enough that the A.I. boom accounts for much of the current resilience in the U.S. economy.
To fund these ambitions, the companies have been forced to scramble for capital by taking out loans and, in some cases, selling more stock. While their core businesses generally remain healthy, these financial maneuvers have unsettled investors who are questioning which bets will ultimately pay off. The buying binge has triggered a sell-off in tech stocks, with the Nasdaq dropping more than 2 percent in early trading on Friday as markets digested the latest reports.
Individual stock performance has reflected this volatility. Google reported underwhelming results Wednesday, and by Thursday's market close, its stock had fallen more than 12 percent, erasing all gains for the year. Amazon's shares also traded down after reporting heavy spending on Thursday. Similarly, Meta's shares fell 7 percent last week after results showed the company was using so much cash that it needed to issue new stock to raise funds.
David Tsui, a technology credit analyst at S&P Global Ratings, noted that slight differences in performance are causing significant volatility. He warned that uncertainty could persist for several more years because companies are spending heavily now while the returns on these investments will likely materialize years down the road.
Sources: The New York Times Technology.