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Fears over $828 billion AI capex spending spree help wipe $1 trillion from Nasdaq 100
Fortune • • business
Key Points:
- Major tech companies Amazon, Alphabet, Microsoft, Meta, and SpaceX plan to invest up to $828 billion in capital expenditures by 2026, focusing on AI infrastructure like data centers and high-powered chips.
- This level of spending surpasses the market value of companies like ExxonMobil and Mastercard and approaches the U.S. defense budget, with projections reaching $1 trillion in AI-related capex by 2027.
- The heavy investment and negative free cash flow from most of these companies have contributed to significant market declines, with Nasdaq and S&P 500 experiencing their worst single-day drops since June.
- Companies are increasingly relying on debt and share issuance to fund these investments, raising concerns about broader economic impacts if the AI infrastructure bets do not yield expected returns.
- Despite the risks, cloud revenue growth driven by AI demand offers some optimism, but the long-term profitability of these massive infrastructure investments remains uncertain.
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