Cracks are emerging in the AI spending boom

Alphabet, Amazon, Meta, and Microsoft have outlined more than $740 billion in capital expenditures this year, and investors are growing anxious about negative free cash flow, mounting debt, and whether the spending will pay off. Alphabet reported negative free cash flow of $9.1 billion in the third quarter as capex rose to $51.4 billion, while Amazon posted negative free cash flow of $42.4 billion over the past 12 months and Meta reported negative free cash flow of $2.1 billion; Microsoft was the exception with $18.6 billion in positive free cash flow. The anxiety hit markets, with the Nasdaq falling 2.9% and chip stocks dropping, and the Financial Times reported that Blackstone warned Anthropic might not qualify for an investment-grade rating after its IPO.