"966 Trillion Won This Year Alone" Record AI Spending by Big Tech Rekindles Profitability Fears

Amazon, Meta, Google, and Microsoft in Fierce AI Investment Race
Profitability Concerns Resurface as Cash Flows Come Under Strain

Major big tech companies are expected to invest 660 billion dollars (about 966 trillion won) this year to gain an edge in the artificial intelligence (AI) race. Given this unprecedented scale of spending, market experts expect big tech management teams to either reduce shareholder returns, cut back on cash holdings, or raise significantly more funding from capital markets than originally planned.

According to the Financial Times (FT) on the 8th (local time), the combined projected capital expenditures (CAPEX) for this year by four companies - Amazon, Meta, Google, and Microsoft - reach 660 billion dollars. The investment will be used for data centers equipped with high-performance chips that are essential for AI development and operation.

Analysts at JP Morgan said, "This outcome clearly shows a positive outlook for the issuance of high-credit-quality bonds," and projected that tech and media companies will issue at least 337 billion dollars (about 493 trillion won) of investment-grade bonds this year.

On the 6th, Amazon filed documents with the Securities and Exchange Commission related to the issuance of stock or corporate bonds, signaling the possibility of additional fundraising. According to estimates by S&P Capital IQ, this year's planned 200 billion dollars (293 trillion won) in capital expenditures will exceed its operating cash flow of 180 billion dollars (263 trillion won).

Oracle last week carried out a 25 billion dollar (about 36 trillion won) bond issuance to step up its large-scale investment in artificial intelligence (AI). This eased investors' concerns over how it would secure funding for a 300 billion dollar (about 439 trillion won) contract to provide computing power to OpenAI, the loss-making developer of ChatGPT.

TD Securities said that, supported by potential "mega-deals" from companies such as Amazon, Meta, and Alphabet, next week's issuance of investment-grade corporate bonds could reach up to 80 billion dollars (about 117 trillion won. This is twice the typical level in previous years.

This has rekindled concerns about companies engaged in the AI investment race. There is a possibility that profitability will deteriorate as companies such as OpenAI with ChatGPT, Google with Gemini, and Anthropic with Claude competitively pour money into AI infrastructure.

A researcher at BNP Paribas noted that the free cash flows of Oracle, Alphabet, Amazon, and Meta "have started to plunge into negative territory," adding, "At least for now, only Microsoft appears to be more resilient."

Meta has forecast capital expenditures of up to 135 billion dollars (about 197 trillion won) this year. This is being compared with analysts' expectations of 130 billion dollars (about 190 trillion won) in operating cash flow. Meta, the parent company of Facebook and Instagram, raised 30 billion dollars (about 43 trillion won) last October through the largest bond issuance in the history of any social media group.

Alphabet is expected to generate 195 billion dollars in cash flow but has drawn up capital expenditure plans totaling 185 billion dollars (about 271 trillion won). On top of that, it must also carry out share buybacks and pay dividends. Alphabet's long-term debt surged from 10.9 billion dollars (about 15 trillion won) in 2024 to 46.5 billion dollars (about 68 trillion won) in 2025, but as of the end of last year its total cash and cash equivalents stood at 126.8 billion dollars (about 185 trillion won).

Russ Mould, investment director at stockbroker AJ Bell, said, "Recent concerns that internet companies are shifting from asset-light business models to capital-intensive models have hit tech stocks, making cash flows more uncertain and harder to predict than before."

He added, "Among AI-focused technology companies, the growth rate of capital expenditures is far outpacing revenue growth," and said, "The first signs of this trend are rising debt levels and the scaling back of share repurchase programs."