Big Tech’s artificial intelligence expansion is increasingly being viewed through the lens of cash burn, and the latest earnings season has intensified a divide between companies that can self-finance their AI ambitions and those relying on heavy external capital. Bank of America senior strategist Michael Hartnett now argues that selected Magnificent Seven bonds yielding between 6% and 8% look increasingly attractive after the recent selloff, even as he remains cautious on owning the shares themselves.
Amazon reported $42.4 billion in negative free cash flow on a trailing 12-month basis despite operating cash flow rising 29% to $168.3 billion. Its capital expenditure reached $77.26 billion in the quarter, about $20 billion above LSEG estimates, and the company maintained a $220 billion capex forecast for 2026. Meta reported negative free cash flow of $2.12 billion and raised the lower end of its full-year capital expenditure forecast to $135 billion. Alphabet’s free cash flow swung to negative $9.07 billion, far worse than the $2.70 billion analysts expected, even as Google Cloud revenue more than doubled to $30.71 billion.
The market reaction has been sharp. Alphabet shares plunged 13% on Thursday, erasing roughly $500 billion in market value, while Amazon shares fell around 2% on Friday. Reuters reported that more than $2 trillion in market value is set to be wiped from the Nasdaq 100 this month as investors reassess the sustainability of the AI investment boom. Microsoft, by contrast, generated $18.6 billion in free cash flow and reported 48% growth in its Azure cloud business, about $10 billion above expectations.
Financing data highlight the pressure. Hartnett put hyperscaler debt issuance at $182 billion this year alongside $89 billion in equity issuance, for a combined $271 billion. Google has raised more than $140 billion through debt and equity offerings, Amazon has raised $98 billion through bond deals, and Meta has raised $62.5 billion. Hartnett views Meta’s plan to raise up to $95 billion through stock offerings as evidence that the 'era of big buybacks is over,' though he says the effect on creditors depends on the terms and execution.
Strategists remain divided. Dave Wagner of Aptus Capital Advisors said operations generated plenty of cash but capital expenditure 'just absolutely swallowed it.' Brian Mulberry of Zacks Investment Management said Microsoft appears to be the only hyperscaler able to generate cash while running the business. Others, such as Raymond James’ Matt Orton and Check Capital Management’s Christopher Ballard, argued the negative free cash flow may be temporary and manageable given strong balance sheets. Morgan Stanley analysts added that companies create value when investments generate returns above their cost of capital.
For the crypto market, the Big Tech selloff and elevated financing costs could weigh on broader risk sentiment, though the news is primarily an equities and credit market story rather than a direct crypto-specific event.
