Meta, Microsoft, Amazon Face Investor Concerns Over AI Spending
Investors are growing wary of the massive capital expenditures by major tech companies like Meta (META), Microsoft (MSFT), and Alphabet's Google as they ramp up spending on artificial intelligence infrastructure. Last week, Alphabet reported a record $112.1 billion quarterly profit but saw its shares fall over 7% due to concerns about rising capex plans. The company increased its capital expenditure forecast for the year by $15 billion. Moody's analysts have warned that these companies' aggressive spending could threaten their credit quality as they shift from asset-light models to more capital-intensive operations, potentially leading to negative or reduced free cash flow and higher leverage on balance sheets. Combined capex plans across Alphabet (GOOGL), Microsoft, Meta, Amazon (AMZN), Oracle (ORCL), and CoreWeave are expected to reach $700 billion in 2026 and could exceed $1 trillion by 2027. UBS Global Wealth Management suggests that while capex concerns persist, long-term investors should remain invested due to strong earnings growth. However, Oracle faces a more immediate risk as it is rated closer to junk status with S&P recently downgrading the company.
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Topics: AI capital expenditure hyperscalers investor sentiment